Correlation Between Alger Spectra and Alger Smidcap

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

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

Diversification Opportunities for Alger Spectra and Alger Smidcap

0.85

Correlation Coefficient

Alger Spectra  Alger Smidcap

Very poor diversification

The 3 months correlation between Alger and Alger is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alger Spectra Fund and Alger Smidcap Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smidcap Focus and Alger Spectra 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 Spectra Fund are associated (or correlated) with Alger Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smidcap Focus has no effect on the direction of Alger Spectra i.e., Alger Spectra and Alger Smidcap go up and down completely randomly.

Pair Corralation between Alger Spectra and Alger Smidcap

Assuming the 90 days horizon Alger Spectra Fund is expected to generate 1.31 times more return on investment than Alger Smidcap. However, Alger Spectra is 1.31 times more volatile than Alger Smidcap Focus. It trades about -0.08 of its potential returns per unit of risk. Alger Smidcap Focus is currently generating about -0.15 per unit of risk. If you would invest  2,261  in Alger Spectra Fund on December 20, 2024 and sell it today you would lose (236.00) from holding Alger Spectra Fund or give up 10.44% of portfolio value over 90 days.

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

Alger Spectra Fund  vs.  Alger Smidcap Focus

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 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 Smidcap Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Smidcap Focus has generated negative risk-adjusted returns adding no value to fund investors. In spite of unfluctuating performance in the last few months, the Fund's basic 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.

Pair Trading with Alger Spectra and Alger Smidcap

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

The idea behind Alger Spectra Fund and Alger Smidcap Focus 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.