Correlation Between Commonwealth Global and Alger Capital
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global 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 Commonwealth Global and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Global Fund and Alger Capital Appreciation, you can compare the effects of market volatilities on Commonwealth Global 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 Commonwealth Global with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and Alger Capital.
Diversification Opportunities for Commonwealth Global and Alger Capital
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Commonwealth and Alger is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund 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 Commonwealth Global 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 Commonwealth Global Fund 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 Commonwealth Global i.e., Commonwealth Global and Alger Capital go up and down completely randomly.
Pair Corralation between Commonwealth Global and Alger Capital
Assuming the 90 days horizon Commonwealth Global is expected to generate 242.0 times less return on investment than Alger Capital. But when comparing it to its historical volatility, Commonwealth Global Fund is 1.6 times less risky than Alger Capital. It trades about 0.0 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,806 in Alger Capital Appreciation on August 26, 2024 and sell it today you would earn a total of 334.00 from holding Alger Capital Appreciation or generate 6.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Global Fund vs. Alger Capital Appreciation
Performance |
| Timeline |
| Commonwealth Global |
| Alger Capital Apprec |
Commonwealth Global and Alger Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and Alger Capital
The main advantage of trading using opposite Commonwealth Global and Alger Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global 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.The idea behind Commonwealth Global Fund and Alger Capital Appreciation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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