Correlation Between GM and Alger Smallcap
Can any of the company-specific risk be diversified away by investing in both GM and Alger Smallcap 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 Smallcap 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 Smallcap Growth, you can compare the effects of market volatilities on GM and Alger Smallcap 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 Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Alger Smallcap.
Diversification Opportunities for GM and Alger Smallcap
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Alger is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Alger Smallcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smallcap Growth 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 Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smallcap Growth has no effect on the direction of GM i.e., GM and Alger Smallcap go up and down completely randomly.
Pair Corralation between GM and Alger Smallcap
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.67 times more return on investment than Alger Smallcap. However, GM is 1.67 times more volatile than Alger Smallcap Growth. It trades about 0.05 of its potential returns per unit of risk. Alger Smallcap Growth is currently generating about 0.05 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,699 from holding General Motors or generate 44.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Alger Smallcap Growth
Performance |
| Timeline |
| General Motors |
| Alger Smallcap Growth |
GM and Alger Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Alger Smallcap
The main advantage of trading using opposite GM and Alger Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Alger Smallcap 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 Smallcap will offset losses from the drop in Alger Smallcap's long position.The idea behind General Motors and Alger Smallcap Growth 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 Smallcap vs. Allianzgi Convertible Income | Alger Smallcap vs. Advent Claymore Convertible | Alger Smallcap vs. Calamos Dynamic Convertible | Alger Smallcap vs. Fidelity Sai Convertible |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |