Correlation Between Alger Smallcap and Gmo High
Can any of the company-specific risk be diversified away by investing in both Alger Smallcap and Gmo High 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 Smallcap and Gmo High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Smallcap Growth and Gmo High Yield, you can compare the effects of market volatilities on Alger Smallcap and Gmo High 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 Smallcap with a short position of Gmo High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Smallcap and Gmo High.
Diversification Opportunities for Alger Smallcap and Gmo High
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alger and GMO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alger Smallcap Growth and Gmo High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo High Yield and Alger Smallcap 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 Smallcap Growth are associated (or correlated) with Gmo High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo High Yield has no effect on the direction of Alger Smallcap i.e., Alger Smallcap and Gmo High go up and down completely randomly.
Pair Corralation between Alger Smallcap and Gmo High
Assuming the 90 days horizon Alger Smallcap Growth is expected to generate 8.07 times more return on investment than Gmo High. However, Alger Smallcap is 8.07 times more volatile than Gmo High Yield. It trades about 0.28 of its potential returns per unit of risk. Gmo High Yield is currently generating about 0.35 per unit of risk. If you would invest 1,791 in Alger Smallcap Growth on September 6, 2024 and sell it today you would earn a total of 162.00 from holding Alger Smallcap Growth or generate 9.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Alger Smallcap Growth vs. Gmo High Yield
Performance |
Timeline |
Alger Smallcap Growth |
Gmo High Yield |
Alger Smallcap and Gmo High Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alger Smallcap and Gmo High
The main advantage of trading using opposite Alger Smallcap and Gmo High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Smallcap position performs unexpectedly, Gmo High 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 Gmo High will offset losses from the drop in Gmo High's long position.Alger Smallcap vs. Alger Midcap Growth | Alger Smallcap vs. Alger Midcap Growth | Alger Smallcap vs. Alger Mid Cap | Alger Smallcap vs. Alger Small Cap |
Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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