Correlation Between Alger 35 and IShares SP

Can any of the company-specific risk be diversified away by investing in both Alger 35 and IShares SP 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 35 and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alger 35 ETF and iShares SP 500, you can compare the effects of market volatilities on Alger 35 and IShares SP 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 35 with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger 35 and IShares SP.

Diversification Opportunities for Alger 35 and IShares SP

0.97

Correlation Coefficient

Alger 35  IShares SP

Almost no diversification

The 3 months correlation between Alger and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Alger 35 ETF and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and Alger 35 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 35 ETF are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Alger 35 i.e., Alger 35 and IShares SP go up and down completely randomly.

Pair Corralation between Alger 35 and IShares SP

Given the investment horizon of 90 days Alger 35 ETF is expected to generate 1.21 times more return on investment than IShares SP. However, Alger 35 is 1.21 times more volatile than iShares SP 500. It trades about 0.28 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.2 per unit of risk. If you would invest  2,063  in Alger 35 ETF on September 3, 2024 and sell it today you would earn a total of  481.00  from holding Alger 35 ETF or generate 23.32% return on investment over 90 days.

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

Alger 35 ETF  vs.  iShares SP 500

Alger 35 ETF

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger 35 ETF are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Alger 35 showed solid returns over the last few months and may actually be approaching a breakup point.

iShares SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alger 35 and IShares SP

The main advantage of trading using opposite Alger 35 and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger 35 position performs unexpectedly, IShares SP 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 IShares SP will offset losses from the drop in IShares SP's long position.

The idea behind Alger 35 ETF and iShares SP 500 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.