Correlation Between Alger Capital and Optimum Small-mid

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

By analyzing existing cross correlation between Alger Capital Appreciation and Optimum Small Mid Cap, you can compare the effects of market volatilities on Alger Capital and Optimum Small-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 Alger Capital with a short position of Optimum Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Capital and Optimum Small-mid.

Diversification Opportunities for Alger Capital and Optimum Small-mid

0.9

Correlation Coefficient

Alger Capital  Optimum Small-mid

Almost no diversification

The 3 months correlation between Alger and Optimum is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alger Capital Appreciation and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid and Alger Capital 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 Capital Appreciation are associated (or correlated) with Optimum Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Alger Capital i.e., Alger Capital and Optimum Small-mid go up and down completely randomly.

Pair Corralation between Alger Capital and Optimum Small-mid

Assuming the 90 days horizon Alger Capital Appreciation is expected to generate 1.58 times more return on investment than Optimum Small-mid. However, Alger Capital is 1.58 times more volatile than Optimum Small Mid Cap. It trades about 0.0 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about -0.05 per unit of risk. If you would invest  3,508  in Alger Capital Appreciation on October 25, 2024 and sell it today you would lose (59.00) from holding Alger Capital Appreciation or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Alger Capital Appreciation  vs.  Optimum Small Mid Cap

Alger Capital Apprec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Optimum Small Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optimum Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Optimum Small-mid 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 Capital and Optimum Small-mid

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

The idea behind Alger Capital Appreciation and Optimum Small Mid Cap 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.