Correlation Between Microsoft and Alger Smallcap
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Alger Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Alger Smallcap Growth, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Alger Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Alger Smallcap.
Diversification Opportunities for Microsoft and Alger Smallcap
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Alger is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 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 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 Microsoft i.e., Microsoft and Alger Smallcap go up and down completely randomly.
Pair Corralation between Microsoft and Alger Smallcap
Given the investment horizon of 90 days Microsoft is expected to generate 1.15 times more return on investment than Alger Smallcap. However, Microsoft is 1.15 times more volatile than Alger Smallcap Growth. It trades about 0.08 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 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,821 from holding Microsoft or generate 70.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Alger Smallcap Growth
Performance |
| Timeline |
| Microsoft |
| Alger Smallcap Growth |
Microsoft and Alger Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Alger Smallcap
The main advantage of trading using opposite Microsoft and Alger Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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