Correlation Between Ariel Focus and Alger Spectra

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

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

Diversification Opportunities for Ariel Focus and Alger Spectra

0.68

Correlation Coefficient

Ariel Focus  Alger Spectra

Poor diversification

The 3 months correlation between Ariel and ALGER is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Focus Fund and Alger Spectra Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Spectra and Ariel Focus 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 Ariel Focus Fund are associated (or correlated) with Alger Spectra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Spectra has no effect on the direction of Ariel Focus i.e., Ariel Focus and Alger Spectra go up and down completely randomly.

Pair Corralation between Ariel Focus and Alger Spectra

Assuming the 90 days horizon Ariel Focus Fund is expected to under-perform the Alger Spectra. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ariel Focus Fund is 1.95 times less risky than Alger Spectra. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Alger Spectra Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,104  in Alger Spectra Fund on December 1, 2024 and sell it today you would lose (259.00) from holding Alger Spectra Fund or give up 8.34% of portfolio value over 90 days.

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

Ariel Focus Fund  vs.  Alger Spectra Fund

Ariel Focus Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ariel Focus Fund 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.

Alger Spectra

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Spectra Fund 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 Ariel Focus and Alger Spectra

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

The idea behind Ariel Focus Fund and Alger Spectra Fund 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.