Correlation Between Alger Small and Emerald Banking

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

Diversification Opportunities for Alger Small and Emerald Banking

0.86

Correlation Coefficient

Alger Small  Emerald Banking

Very poor diversification

The 3 months correlation between Alger and Emerald is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Emerald Banking And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Banking And 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 Emerald Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Banking And has no effect on the direction of Alger Small i.e., Alger Small and Emerald Banking go up and down completely randomly.

Pair Corralation between Alger Small and Emerald Banking

Assuming the 90 days horizon Alger Small Cap is expected to generate 1.13 times more return on investment than Emerald Banking. However, Alger Small is 1.13 times more volatile than Emerald Banking And. It trades about -0.07 of its potential returns per unit of risk. Emerald Banking And is currently generating about -0.28 per unit of risk. If you would invest  2,132  in Alger Small Cap on October 8, 2024 and sell it today you would lose (48.00) from holding Alger Small Cap or give up 2.25% 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.  Emerald Banking And

Alger Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Alger Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Emerald Banking And

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Banking And are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Banking may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alger Small and Emerald Banking

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

The idea behind Alger Small Cap and Emerald Banking And 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.