Correlation Between Alger Smallcap and Gmo High

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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

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alger and Gmo is 0.89. 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 5.93 times more return on investment than Gmo High. However, Alger Smallcap is 5.93 times more volatile than Gmo High Yield. It trades about 0.1 of its potential returns per unit of risk. Gmo High Yield is currently generating about 0.24 per unit of risk. If you would invest  1,685  in Alger Smallcap Growth on September 8, 2024 and sell it today you would earn a total of  265.00  from holding Alger Smallcap Growth or generate 15.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alger Smallcap Growth  vs.  Gmo High Yield

 Performance 
       Timeline  
Alger Smallcap Growth 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smallcap Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Smallcap showed solid returns over the last few months and may actually be approaching a breakup point.
Gmo High Yield 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Gmo High Yield are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.
The idea behind Alger Smallcap Growth and Gmo High Yield 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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