Correlation Between Microsoft and Alger Mid
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Alger Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Alger Mid Cap, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Alger Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Alger Mid.
Diversification Opportunities for Microsoft and Alger Mid
Average diversification
The 3 months correlation between Microsoft and Alger is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 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 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 Microsoft i.e., Microsoft and Alger Mid go up and down completely randomly.
Pair Corralation between Microsoft and Alger Mid
Given the investment horizon of 90 days Microsoft is expected to generate 6.83 times less return on investment than Alger Mid. But when comparing it to its historical volatility, Microsoft is 1.01 times less risky than Alger Mid. It trades about 0.02 of its potential returns per unit of risk. Alger Mid Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,547 in Alger Mid Cap on September 3, 2024 and sell it today you would earn a total of 335.00 from holding Alger Mid Cap or generate 21.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Alger Mid Cap
Performance |
| Timeline |
| Microsoft |
| Alger Mid Cap |
Microsoft and Alger Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Alger Mid
The main advantage of trading using opposite Microsoft and Alger Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Alger Mid vs. Alger Small Cap | Alger Mid vs. Alger Small Cap | Alger Mid vs. Virtus Kar Mid Cap | Alger Mid vs. Alger Mid Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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