Correlation Between Alger Health and Eaton Vance

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

Diversification Opportunities for Alger Health and Eaton Vance

0.7

Correlation Coefficient

Alger Health  Eaton Vance

Poor diversification

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

Pair Corralation between Alger Health and Eaton Vance

Assuming the 90 days horizon Alger Health Sciences is expected to under-perform the Eaton Vance. But the mutual fund apears to be less risky and, when comparing its historical volatility, Alger Health Sciences is 1.49 times less risky than Eaton Vance. The mutual fund trades about -0.39 of its potential returns per unit of risk. The Eaton Vance Balanced is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  1,250  in Eaton Vance Balanced on October 3, 2024 and sell it today you would lose (76.00) from holding Eaton Vance Balanced or give up 6.08% of portfolio value over 90 days.

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

Alger Health Sciences  vs.  Eaton Vance Balanced

Alger Health Sciences

Risk-Adjusted Performance

0 of 100

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 fairly strong fundamental indicators, Alger Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Alger Health Sciences and Eaton Vance Balanced 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 Stocks Directory module to find actively traded stocks across global markets.