Correlation Between Alger Small and Alger Concentrated

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

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

Diversification Opportunities for Alger Small and Alger Concentrated

0.88

Correlation Coefficient

Alger Small  Alger Concentrated

Very poor diversification

The 3 months correlation between Alger and Alger is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Alger Concentrated Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Concentrated Equity and Alger Small 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 Small Cap are associated (or correlated) with Alger Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Concentrated Equity has no effect on the direction of Alger Small i.e., Alger Small and Alger Concentrated go up and down completely randomly.

Pair Corralation between Alger Small and Alger Concentrated

Assuming the 90 days horizon Alger Small Cap is expected to under-perform the Alger Concentrated. But the mutual fund apears to be less risky and, when comparing its historical volatility, Alger Small Cap is 1.13 times less risky than Alger Concentrated. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Alger Concentrated Equity is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Alger Concentrated Equity on December 25, 2024 and sell it today you would lose (147.00) from holding Alger Concentrated Equity or give up 10.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Alger Small Cap  vs.  Alger Concentrated Equity

Alger Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Alger Concentrated Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Concentrated Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Alger Small and Alger Concentrated

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

The idea behind Alger Small Cap and Alger Concentrated Equity 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.