Correlation Between Federated Institutional and Alger Capital
Can any of the company-specific risk be diversified away by investing in both Federated Institutional 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 Federated Institutional and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Institutional High and Alger Capital Appreciation, you can compare the effects of market volatilities on Federated Institutional 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 Federated Institutional with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Alger Capital.
Diversification Opportunities for Federated Institutional and Alger Capital
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Federated and Alger is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High 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 Federated Institutional 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 Federated Institutional High 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 Federated Institutional i.e., Federated Institutional and Alger Capital go up and down completely randomly.
Pair Corralation between Federated Institutional and Alger Capital
Assuming the 90 days horizon Federated Institutional is expected to generate 14.5 times less return on investment than Alger Capital. But when comparing it to its historical volatility, Federated Institutional High is 7.44 times less risky than Alger Capital. It trades about 0.12 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,484 in Alger Capital Appreciation on September 12, 2024 and sell it today you would earn a total of 790.00 from holding Alger Capital Appreciation or generate 17.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Federated Institutional High vs. Alger Capital Appreciation
Performance |
| Timeline |
| Federated Institutional |
| Alger Capital Apprec |
Federated Institutional and Alger Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and Alger Capital
The main advantage of trading using opposite Federated Institutional and Alger Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional 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 Federated Institutional High 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.
| Alger Capital vs. Qs Defensive Growth | Alger Capital vs. Qs Moderate Growth | Alger Capital vs. Praxis Growth Index | Alger Capital vs. Small Pany Growth |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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