Correlation Between Sarofim Equity and Alger Small
Can any of the company-specific risk be diversified away by investing in both Sarofim Equity and Alger Small 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 Sarofim Equity and Alger Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sarofim Equity and Alger Small Cap, you can compare the effects of market volatilities on Sarofim Equity and Alger Small 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 Sarofim Equity with a short position of Alger Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarofim Equity and Alger Small.
Diversification Opportunities for Sarofim Equity and Alger Small
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sarofim and Alger is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Alger Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Small Cap and Sarofim Equity 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 Sarofim Equity are associated (or correlated) with Alger Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Small Cap has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Alger Small go up and down completely randomly.
Pair Corralation between Sarofim Equity and Alger Small
Assuming the 90 days horizon Sarofim Equity is expected to generate 1.91 times less return on investment than Alger Small. But when comparing it to its historical volatility, Sarofim Equity is 2.73 times less risky than Alger Small. It trades about 0.14 of its potential returns per unit of risk. Alger Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,095 in Alger Small Cap on September 13, 2024 and sell it today you would earn a total of 58.00 from holding Alger Small Cap or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sarofim Equity vs. Alger Small Cap
Performance |
| Timeline |
| Sarofim Equity |
| Alger Small Cap |
Sarofim Equity and Alger Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sarofim Equity and Alger Small
The main advantage of trading using opposite Sarofim Equity and Alger Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarofim Equity position performs unexpectedly, Alger Small 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 Small will offset losses from the drop in Alger Small's long position.| Sarofim Equity vs. Investec Emerging Markets | Sarofim Equity vs. Vy Jpmorgan Emerging | Sarofim Equity vs. Transamerica Emerging Markets | Sarofim Equity vs. Black Oak Emerging |
| Alger Small vs. Transamerica Large Cap | Alger Small vs. M Large Cap | Alger Small vs. Touchstone Large Cap | Alger Small vs. Dana Large 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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