Correlation Between Alger Midcap and State Street

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

By analyzing existing cross correlation between Alger Midcap Growth and State Street Smallmid, you can compare the effects of market volatilities on Alger Midcap and State Street 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 Midcap with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Midcap and State Street.

Diversification Opportunities for Alger Midcap and State Street

0.96

Correlation Coefficient

Alger Midcap  State Street

Almost no diversification

The 3 months correlation between Alger and State is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Alger Midcap Growth and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid and Alger Midcap 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 Midcap Growth are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of Alger Midcap i.e., Alger Midcap and State Street go up and down completely randomly.

Pair Corralation between Alger Midcap and State Street

Assuming the 90 days horizon Alger Midcap Growth is expected to generate 1.07 times more return on investment than State Street. However, Alger Midcap is 1.07 times more volatile than State Street Smallmid. It trades about -0.25 of its potential returns per unit of risk. State Street Smallmid is currently generating about -0.33 per unit of risk. If you would invest  2,585  in Alger Midcap Growth on October 15, 2024 and sell it today you would lose (170.00) from holding Alger Midcap Growth or give up 6.58% of portfolio value over 90 days.

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

Alger Midcap Growth  vs.  State Street Smallmid

Alger Midcap Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Midcap Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Smallmid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Smallmid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, State Street 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 Midcap and State Street

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

The idea behind Alger Midcap Growth and State Street Smallmid 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.