Correlation Between Alger Midcap and Alger Emerging

Can any of the company-specific risk be diversified away by investing in both Alger Midcap and Alger Emerging 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 Alger Emerging 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 Alger Emerging Markets, you can compare the effects of market volatilities on Alger Midcap and Alger Emerging 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 Alger Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Midcap and Alger Emerging.

Diversification Opportunities for Alger Midcap and Alger Emerging

0.07

Correlation Coefficient

Alger Midcap  Alger Emerging

Significant diversification

The 3 months correlation between Alger and Alger is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alger Midcap Growth and Alger Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Emerging Markets 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 Alger Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Emerging Markets has no effect on the direction of Alger Midcap i.e., Alger Midcap and Alger Emerging go up and down completely randomly.

Pair Corralation between Alger Midcap and Alger Emerging

Assuming the 90 days horizon Alger Midcap Growth is expected to under-perform the Alger Emerging. In addition to that, Alger Midcap is 1.81 times more volatile than Alger Emerging Markets. It trades about -0.05 of its total potential returns per unit of risk. Alger Emerging Markets is currently generating about 0.04 per unit of volatility. If you would invest  986.00  in Alger Emerging Markets on December 28, 2024 and sell it today you would earn a total of  24.00  from holding Alger Emerging Markets or generate 2.43% return on investment over 90 days.

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

Alger Midcap Growth  vs.  Alger Emerging Markets

Alger Midcap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Midcap Growth has generated negative risk-adjusted returns adding no value to fund investors. 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.

Alger Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Emerging Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Alger Emerging 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 Alger Emerging

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

The idea behind Alger Midcap Growth and Alger Emerging Markets 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.