Correlation Between Alger Small and Alger Balanced

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

Diversification Opportunities for Alger Small and Alger Balanced

0.88

Correlation Coefficient

Alger Small  Alger Balanced

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 Balanced Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Balanced Portfolio 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Balanced Portfolio has no effect on the direction of Alger Small i.e., Alger Small and Alger Balanced go up and down completely randomly.

Pair Corralation between Alger Small and Alger Balanced

Assuming the 90 days horizon Alger Small Cap is expected to generate 3.01 times more return on investment than Alger Balanced. However, Alger Small is 3.01 times more volatile than Alger Balanced Portfolio. It trades about 0.21 of its potential returns per unit of risk. Alger Balanced Portfolio is currently generating about 0.15 per unit of risk. If you would invest  1,781  in Alger Small Cap on September 12, 2024 and sell it today you would earn a total of  345.00  from holding Alger Small Cap or generate 19.37% return on investment over 90 days.

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

Alger Small Cap  vs.  Alger Balanced Portfolio

Alger Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Alger Small showed solid returns over the last few months and may actually be approaching a breakup point.

Alger Balanced Portfolio

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Balanced Portfolio are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Balanced 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 Small and Alger Balanced

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

The idea behind Alger Small Cap and Alger Balanced Portfolio 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.