Correlation Between Alger Health and Knights Of

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

Diversification Opportunities for Alger Health and Knights Of

-0.06

Correlation Coefficient

Alger Health  Knights Of

Good diversification

The 3 months correlation between Alger and Knights is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Knights Of Umbus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knights Of Umbus 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 Knights Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knights Of Umbus has no effect on the direction of Alger Health i.e., Alger Health and Knights Of go up and down completely randomly.

Pair Corralation between Alger Health and Knights Of

Assuming the 90 days horizon Alger Health Sciences is expected to under-perform the Knights Of. But the mutual fund apears to be less risky and, when comparing its historical volatility, Alger Health Sciences is 1.3 times less risky than Knights Of. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Knights Of Umbus is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,136  in Knights Of Umbus on October 11, 2024 and sell it today you would lose (41.00) from holding Knights Of Umbus or give up 1.92% of portfolio value over 90 days.

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

Alger Health Sciences  vs.  Knights Of Umbus

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.

Knights Of Umbus

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Knights Of Umbus are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Knights Of 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 Knights Of

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

The idea behind Alger Health Sciences and Knights Of Umbus 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.