Correlation Between Alger Capital and Select Fund

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

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

Diversification Opportunities for Alger Capital and Select Fund

0.62

Correlation Coefficient

Alger Capital  Select Fund

Poor diversification

The 3 months correlation between Alger and Select is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alger Capital Appreciation and Select Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund R and Alger Capital 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 Capital Appreciation are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund R has no effect on the direction of Alger Capital i.e., Alger Capital and Select Fund go up and down completely randomly.

Pair Corralation between Alger Capital and Select Fund

Assuming the 90 days horizon Alger Capital Appreciation is expected to generate 1.19 times more return on investment than Select Fund. However, Alger Capital is 1.19 times more volatile than Select Fund R. It trades about 0.28 of its potential returns per unit of risk. Select Fund R is currently generating about 0.18 per unit of risk. If you would invest  7,071  in Alger Capital Appreciation on September 12, 2024 and sell it today you would earn a total of  1,465  from holding Alger Capital Appreciation or generate 20.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Alger Capital Appreciation  vs.  Select Fund R

Alger Capital Apprec

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Capital Appreciation are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Alger Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Select Fund R

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund R are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Select Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alger Capital and Select Fund

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

The idea behind Alger Capital Appreciation and Select Fund R 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.