Correlation Between Highland Long/short and Alger Mid
Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Alger Mid 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 Highland Long/short and Alger Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highland Longshort Healthcare and Alger Mid Cap, you can compare the effects of market volatilities on Highland Long/short and Alger Mid 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 Highland Long/short with a short position of Alger Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Alger Mid.
Diversification Opportunities for Highland Long/short and Alger Mid
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Highland and Alger is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Alger Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Mid Cap and Highland Long/short 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 Highland Longshort Healthcare are associated (or correlated) with Alger Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Mid Cap has no effect on the direction of Highland Long/short i.e., Highland Long/short and Alger Mid go up and down completely randomly.
Pair Corralation between Highland Long/short and Alger Mid
Assuming the 90 days horizon Highland Long/short is expected to generate 5.4 times less return on investment than Alger Mid. But when comparing it to its historical volatility, Highland Longshort Healthcare is 5.39 times less risky than Alger Mid. It trades about 0.14 of its potential returns per unit of risk. Alger Mid Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,804 in Alger Mid Cap on August 30, 2024 and sell it today you would earn a total of 368.00 from holding Alger Mid Cap or generate 20.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. Alger Mid Cap
Performance |
| Timeline |
| Highland Long/short |
| Alger Mid Cap |
Highland Long/short and Alger Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Long/short and Alger Mid
The main advantage of trading using opposite Highland Long/short and Alger Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, Alger Mid 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 Mid will offset losses from the drop in Alger Mid's long position.The idea behind Highland Longshort Healthcare and Alger Mid 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 Mid vs. Highland Longshort Healthcare | Alger Mid vs. Alger Health Sciences | Alger Mid vs. Prudential Health Sciences | Alger Mid vs. Baillie Gifford Health |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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