Correlation Between Alger Small and Alger Responsible

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

Diversification Opportunities for Alger Small and Alger Responsible

0.81

Correlation Coefficient

Alger Small  Alger Responsible

Very poor diversification

The 3 months correlation between Alger and Alger is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Alger Responsible Investing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Responsible 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 Responsible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Responsible has no effect on the direction of Alger Small i.e., Alger Small and Alger Responsible go up and down completely randomly.

Pair Corralation between Alger Small and Alger Responsible

Assuming the 90 days horizon Alger Small Cap is expected to under-perform the Alger Responsible. In addition to that, Alger Small is 1.38 times more volatile than Alger Responsible Investing. It trades about -0.23 of its total potential returns per unit of risk. Alger Responsible Investing is currently generating about -0.16 per unit of volatility. If you would invest  1,850  in Alger Responsible Investing on December 2, 2024 and sell it today you would lose (77.00) from holding Alger Responsible Investing or give up 4.16% of portfolio value over 90 days.

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

Alger Small Cap  vs.  Alger Responsible Investing

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 forward 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 Responsible

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Responsible Investing has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Responsible

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

The idea behind Alger Small Cap and Alger Responsible Investing 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.