Correlation Between GM and Alger Large
Can any of the company-specific risk be diversified away by investing in both GM and Alger Large 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 GM and Alger Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Alger Large Cap, you can compare the effects of market volatilities on GM and Alger Large 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 GM with a short position of Alger Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Alger Large.
Diversification Opportunities for GM and Alger Large
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Alger is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Alger Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Large Cap and GM 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 General Motors are associated (or correlated) with Alger Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Large Cap has no effect on the direction of GM i.e., GM and Alger Large go up and down completely randomly.
Pair Corralation between GM and Alger Large
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Alger Large. In addition to that, GM is 1.51 times more volatile than Alger Large Cap. It trades about -0.11 of its total potential returns per unit of risk. Alger Large Cap is currently generating about 0.1 per unit of volatility. If you would invest 8,919 in Alger Large Cap on November 1, 2024 and sell it today you would earn a total of 328.00 from holding Alger Large Cap or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Alger Large Cap
Performance |
| Timeline |
| General Motors |
| Alger Large Cap |
GM and Alger Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Alger Large
The main advantage of trading using opposite GM and Alger Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Alger Large 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 Large will offset losses from the drop in Alger Large's long position.The idea behind General Motors and Alger Large Cap 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 Large vs. L Abbett Growth | Alger Large vs. Stringer Growth Fund | Alger Large vs. Riverparknext Century Growth | Alger Large vs. T Rowe Price |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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