Correlation Between Alger 35 and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Alger 35 and Sterling Capital 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 Sterling Capital 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 Sterling Capital Focus, you can compare the effects of market volatilities on Alger 35 and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger 35 and Sterling Capital.

Diversification Opportunities for Alger 35 and Sterling Capital

0.88

Correlation Coefficient

Alger 35  Sterling Capital

Very poor diversification

The 3 months correlation between Alger and Sterling is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alger 35 ETF and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Focus has no effect on the direction of Alger 35 i.e., Alger 35 and Sterling Capital go up and down completely randomly.

Pair Corralation between Alger 35 and Sterling Capital

Given the investment horizon of 90 days Alger 35 is expected to generate 1.14 times less return on investment than Sterling Capital. In addition to that, Alger 35 is 1.0 times more volatile than Sterling Capital Focus. It trades about 0.25 of its total potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.28 per unit of volatility. If you would invest  2,882  in Sterling Capital Focus on August 30, 2024 and sell it today you would earn a total of  235.00  from holding Sterling Capital Focus or generate 8.15% return on investment over 90 days.

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

Alger 35 ETF  vs.  Sterling Capital Focus

Alger 35 ETF

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger 35 ETF are ranked lower than 17 (%) 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.

Sterling Capital Focus

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Focus are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Sterling Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Alger 35 and Sterling Capital

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

The idea behind Alger 35 ETF and Sterling Capital 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.