Correlation Between Microsoft and Alger Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Alger Capital Appreciation, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Alger Capital.
Diversification Opportunities for Microsoft and Alger Capital
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Alger is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Alger Capital go up and down completely randomly.
Pair Corralation between Microsoft and Alger Capital
Given the investment horizon of 90 days Microsoft is expected to generate 2.12 times less return on investment than Alger Capital. But when comparing it to its historical volatility, Microsoft is 1.03 times less risky than Alger Capital. It trades about 0.19 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 3,718 in Alger Capital Appreciation on September 1, 2024 and sell it today you would earn a total of 380.00 from holding Alger Capital Appreciation or generate 10.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Alger Capital Appreciation
Performance |
| Timeline |
| Microsoft |
| Alger Capital Apprec |
Microsoft and Alger Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Alger Capital
The main advantage of trading using opposite Microsoft and Alger Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Alger Capital vs. Ab Small Cap | Alger Capital vs. Touchstone Small Cap | Alger Capital vs. Jpmorgan Small Cap | Alger Capital vs. Vanguard Small Cap 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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