Correlation Between GM and Alger ETF
Can any of the company-specific risk be diversified away by investing in both GM and Alger ETF 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 ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The Alger ETF, you can compare the effects of market volatilities on GM and Alger ETF 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 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Alger ETF.
Diversification Opportunities for GM and Alger ETF
Very poor diversification
The 3 months correlation between GM and Alger is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Alger ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger ETF 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 ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger ETF has no effect on the direction of GM i.e., GM and Alger ETF go up and down completely randomly.
Pair Corralation between GM and Alger ETF
Allowing for the 90-day total investment horizon GM is expected to generate 1.07 times less return on investment than Alger ETF. In addition to that, GM is 1.59 times more volatile than The Alger ETF. It trades about 0.08 of its total potential returns per unit of risk. The Alger ETF is currently generating about 0.14 per unit of volatility. If you would invest 2,071 in The Alger ETF on September 1, 2024 and sell it today you would earn a total of 556.00 from holding The Alger ETF or generate 26.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. The Alger ETF
Performance |
| Timeline |
| General Motors |
| Alger ETF |
GM and Alger ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Alger ETF
The main advantage of trading using opposite GM and Alger ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Alger ETF 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 ETF will offset losses from the drop in Alger ETF's long position.The idea behind General Motors and The Alger ETF 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 ETF vs. Nexalin Technology | Alger ETF vs. Kilroy Realty Corp | Alger ETF vs. Highwoods Properties | Alger ETF vs. Karat Packaging |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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