Correlation Between Alger Ai and Applied Finance

Can any of the company-specific risk be diversified away by investing in both Alger Ai and Applied Finance 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 Alger Ai and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alger Ai Enablers and Applied Finance Explorer, you can compare the effects of market volatilities on Alger Ai and Applied Finance 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 Alger Ai with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Ai and Applied Finance.

Diversification Opportunities for Alger Ai and Applied Finance

0.29

Correlation Coefficient

Alger Ai  Applied Finance

Modest diversification

The 3 months correlation between Alger and Applied is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alger Ai Enablers and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer and Alger Ai 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 Alger Ai Enablers are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Alger Ai i.e., Alger Ai and Applied Finance go up and down completely randomly.

Pair Corralation between Alger Ai and Applied Finance

Assuming the 90 days horizon Alger Ai Enablers is expected to generate 0.97 times more return on investment than Applied Finance. However, Alger Ai Enablers is 1.03 times less risky than Applied Finance. It trades about 0.11 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.04 per unit of risk. If you would invest  1,017  in Alger Ai Enablers on October 9, 2024 and sell it today you would earn a total of  320.00  from holding Alger Ai Enablers or generate 31.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	37.25%
Values	Daily Returns

Alger Ai Enablers  vs.  Applied Finance Explorer

Alger Ai Enablers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Ai Enablers are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Alger Ai may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Applied Finance Explorer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Finance Explorer has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Applied Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alger Ai and Applied Finance

The main advantage of trading using opposite Alger Ai and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Ai position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.

The idea behind Alger Ai Enablers and Applied Finance Explorer 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.