Correlation Between World Energy and Alger Mid

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

By analyzing existing cross correlation between World Energy Fund and Alger Mid Cap, you can compare the effects of market volatilities on World Energy and Alger Mid 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 World Energy with a short position of Alger Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Alger Mid.

Diversification Opportunities for World Energy and Alger Mid

0.77

Correlation Coefficient

World Energy  Alger Mid

Poor diversification

The 3 months correlation between World and Alger is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Alger Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Mid Cap and World Energy 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 World Energy Fund are associated (or correlated) with Alger Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Mid Cap has no effect on the direction of World Energy i.e., World Energy and Alger Mid go up and down completely randomly.

Pair Corralation between World Energy and Alger Mid

Assuming the 90 days horizon World Energy Fund is expected to generate 0.93 times more return on investment than Alger Mid. However, World Energy Fund is 1.07 times less risky than Alger Mid. It trades about 0.01 of its potential returns per unit of risk. Alger Mid Cap is currently generating about -0.09 per unit of risk. If you would invest  1,411  in World Energy Fund on December 19, 2024 and sell it today you would lose (3.00) from holding World Energy Fund or give up 0.21% of portfolio value over 90 days.

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

World Energy Fund  vs.  Alger Mid Cap

World Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days World Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, World Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with World Energy and Alger Mid

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

The idea behind World Energy Fund and Alger Mid Cap 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..