Correlation Between California High-yield and Alger Mid

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

By analyzing existing cross correlation between California High Yield Municipal and Alger Mid Cap, you can compare the effects of market volatilities on California High-yield and Alger Mid 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 California High-yield with a short position of Alger Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Alger Mid.

Diversification Opportunities for California High-yield and Alger Mid

0.21

Correlation Coefficient

California High-yield  Alger Mid

Modest diversification

The 3 months correlation between California and Alger is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Alger Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Mid Cap and California High-yield 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 California High Yield Municipal are associated (or correlated) with Alger Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Mid Cap has no effect on the direction of California High-yield i.e., California High-yield and Alger Mid go up and down completely randomly.

Pair Corralation between California High-yield and Alger Mid

Assuming the 90 days horizon California High Yield Municipal is expected to generate 0.18 times more return on investment than Alger Mid. However, California High Yield Municipal is 5.43 times less risky than Alger Mid. It trades about -0.4 of its potential returns per unit of risk. Alger Mid Cap is currently generating about -0.15 per unit of risk. If you would invest  998.00  in California High Yield Municipal on October 8, 2024 and sell it today you would lose (20.00) from holding California High Yield Municipal or give up 2.0% of portfolio value over 90 days.

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

California High Yield Municipa  vs.  Alger Mid Cap

California High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California High Yield Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, California High-yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Mid Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with California High-yield and Alger Mid

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

The idea behind California High Yield Municipal and Alger Mid Cap 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.