Correlation Between Alger Smidcap and Amer Beacon

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

By analyzing existing cross correlation between Alger Smidcap Focus and Amer Beacon Ark, you can compare the effects of market volatilities on Alger Smidcap and Amer Beacon 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 Smidcap with a short position of Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Smidcap and Amer Beacon.

Diversification Opportunities for Alger Smidcap and Amer Beacon

0.85

Correlation Coefficient

Alger Smidcap  Amer Beacon

Very poor diversification

The 3 months correlation between Alger and Amer is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alger Smidcap Focus and Amer Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Ark and Alger Smidcap 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 Smidcap Focus are associated (or correlated) with Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Ark has no effect on the direction of Alger Smidcap i.e., Alger Smidcap and Amer Beacon go up and down completely randomly.

Pair Corralation between Alger Smidcap and Amer Beacon

Assuming the 90 days horizon Alger Smidcap Focus is expected to generate 0.54 times more return on investment than Amer Beacon. However, Alger Smidcap Focus is 1.84 times less risky than Amer Beacon. It trades about 0.16 of its potential returns per unit of risk. Amer Beacon Ark is currently generating about 0.07 per unit of risk. If you would invest  1,426  in Alger Smidcap Focus on October 26, 2024 and sell it today you would earn a total of  53.00  from holding Alger Smidcap Focus or generate 3.72% return on investment over 90 days.

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

Alger Smidcap Focus  vs.  Amer Beacon Ark

Alger Smidcap Focus

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smidcap Focus are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Smidcap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amer Beacon Ark

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amer Beacon Ark are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Amer Beacon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alger Smidcap and Amer Beacon

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

The idea behind Alger Smidcap Focus and Amer Beacon Ark 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.