Correlation Between Alger Small and Alger Capital
Can any of the company-specific risk be diversified away by investing in both Alger Small and Alger Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alger Small and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Small Cap and Alger Capital Appreciation, you can compare the effects of market volatilities on Alger Small and Alger Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alger Small with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Small and Alger Capital.
Diversification Opportunities for Alger Small and Alger Capital
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alger and ALGER is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Alger Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Capital Apprec and Alger Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alger Small Cap are associated (or correlated) with Alger Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Capital Apprec has no effect on the direction of Alger Small i.e., Alger Small and Alger Capital go up and down completely randomly.
Pair Corralation between Alger Small and Alger Capital
Assuming the 90 days horizon Alger Small Cap is expected to generate 1.39 times more return on investment than Alger Capital. However, Alger Small is 1.39 times more volatile than Alger Capital Appreciation. It trades about 0.21 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.23 per unit of risk. If you would invest 1,574 in Alger Small Cap on August 30, 2024 and sell it today you would earn a total of 225.00 from holding Alger Small Cap or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Small Cap vs. Alger Capital Appreciation
Performance |
| Timeline |
| Alger Small Cap |
| Alger Capital Apprec |
Alger Small and Alger Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Small and Alger Capital
The main advantage of trading using opposite Alger Small and Alger Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Small position performs unexpectedly, Alger Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Alger Capital will offset losses from the drop in Alger Capital's long position.| Alger Small vs. Putnam Equity Income | Alger Small vs. Putnam Growth Opportunities | Alger Small vs. HUMANA INC | Alger Small vs. Aquagold International |
| Alger Capital vs. Alger Capital Appreciation | Alger Capital vs. Select Fund C | Alger Capital vs. Alger Capital Appreciation | Alger Capital vs. Select Fund R |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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