Correlation Between Alger Smidcap and Alger Responsible

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

Diversification Opportunities for Alger Smidcap and Alger Responsible

0.83

Correlation Coefficient

Alger Smidcap  Alger Responsible

Very poor diversification

The 3 months correlation between Alger and Alger is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alger Smidcap Focus 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 Smidcap 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 Smidcap Focus 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 Smidcap i.e., Alger Smidcap and Alger Responsible go up and down completely randomly.

Pair Corralation between Alger Smidcap and Alger Responsible

Assuming the 90 days horizon Alger Smidcap Focus is expected to generate 1.69 times more return on investment than Alger Responsible. However, Alger Smidcap is 1.69 times more volatile than Alger Responsible Investing. It trades about 0.35 of its potential returns per unit of risk. Alger Responsible Investing is currently generating about 0.33 per unit of risk. If you would invest  1,450  in Alger Smidcap Focus on September 5, 2024 and sell it today you would earn a total of  177.00  from holding Alger Smidcap Focus or generate 12.21% return on investment over 90 days.

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

Alger Smidcap Focus  vs.  Alger Responsible Investing

Alger Smidcap Focus

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smidcap Focus are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Smidcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alger Responsible

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Responsible Investing are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Alger Responsible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alger Smidcap and Alger Responsible

The main advantage of trading using opposite Alger Smidcap and Alger Responsible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Smidcap 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 Smidcap Focus 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.