Correlation Between Davenport Small and Alger Mid

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

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

Diversification Opportunities for Davenport Small and Alger Mid

0.91

Correlation Coefficient

Davenport Small  Alger Mid

Almost no diversification

The 3 months correlation between Davenport and Alger is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Davenport Small Cap 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 Davenport Small 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 Davenport Small Cap 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 Davenport Small i.e., Davenport Small and Alger Mid go up and down completely randomly.

Pair Corralation between Davenport Small and Alger Mid

Assuming the 90 days horizon Davenport Small Cap is expected to under-perform the Alger Mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Davenport Small Cap is 1.45 times less risky than Alger Mid. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Alger Mid Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,297  in Alger Mid Cap on September 12, 2024 and sell it today you would earn a total of  69.00  from holding Alger Mid Cap or generate 5.32% return on investment over 90 days.

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

Davenport Small Cap  vs.  Alger Mid Cap

Davenport Small Cap

Risk-Adjusted Performance

12 of 100

Good

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

Alger Mid Cap

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Davenport Small and Alger Mid

The main advantage of trading using opposite Davenport Small and Alger Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davenport Small 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 Davenport Small Cap 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.