Correlation Between Alger Capital and Vanguard Institutional

Can any of the company-specific risk be diversified away by investing in both Alger Capital and Vanguard Institutional 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 Vanguard Institutional 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 Vanguard Institutional Index, you can compare the effects of market volatilities on Alger Capital and Vanguard Institutional 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 Vanguard Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Capital and Vanguard Institutional.

Diversification Opportunities for Alger Capital and Vanguard Institutional

0.7

Correlation Coefficient

Alger Capital  Vanguard Institutional

Poor diversification

The 3 months correlation between Alger and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alger Capital Appreciation and Vanguard Institutional Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Institutional 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 Vanguard Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Institutional has no effect on the direction of Alger Capital i.e., Alger Capital and Vanguard Institutional go up and down completely randomly.

Pair Corralation between Alger Capital and Vanguard Institutional

Assuming the 90 days horizon Alger Capital Appreciation is expected to under-perform the Vanguard Institutional. In addition to that, Alger Capital is 2.47 times more volatile than Vanguard Institutional Index. It trades about -0.09 of its total potential returns per unit of risk. Vanguard Institutional Index is currently generating about -0.04 per unit of volatility. If you would invest  49,710  in Vanguard Institutional Index on December 2, 2024 and sell it today you would lose (1,132) from holding Vanguard Institutional Index or give up 2.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alger Capital Appreciation  vs.  Vanguard Institutional Index

Alger Capital Apprec

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Institutional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Institutional Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Institutional 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 Vanguard Institutional

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

The idea behind Alger Capital Appreciation and Vanguard Institutional Index 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.