Correlation Between Alger Health and Brown Advisory

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

By analyzing existing cross correlation between Alger Health Sciences and Brown Advisory Growth, you can compare the effects of market volatilities on Alger Health and Brown Advisory 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 Health with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Brown Advisory.

Diversification Opportunities for Alger Health and Brown Advisory

0.86

Correlation Coefficient

Alger Health  Brown Advisory

Very poor diversification

The 3 months correlation between Alger and Brown is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Brown Advisory Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Growth and Alger Health 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 Health Sciences are associated (or correlated) with Brown Advisory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Advisory Growth has no effect on the direction of Alger Health i.e., Alger Health and Brown Advisory go up and down completely randomly.

Pair Corralation between Alger Health and Brown Advisory

Assuming the 90 days horizon Alger Health Sciences is expected to under-perform the Brown Advisory. But the mutual fund apears to be less risky and, when comparing its historical volatility, Alger Health Sciences is 1.07 times less risky than Brown Advisory. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Brown Advisory Growth is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,748  in Brown Advisory Growth on December 28, 2024 and sell it today you would lose (96.00) from holding Brown Advisory Growth or give up 5.49% of portfolio value over 90 days.

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

Alger Health Sciences  vs.  Brown Advisory Growth

Alger Health Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Brown Advisory Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Advisory Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Brown Advisory 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 Health and Brown Advisory

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

The idea behind Alger Health Sciences and Brown Advisory Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.