Correlation Between Davenport Small and Alger Smallcap

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

Diversification Opportunities for Davenport Small and Alger Smallcap

0.93

Correlation Coefficient

Davenport Small  Alger Smallcap

Almost no diversification

The 3 months correlation between Davenport and Alger is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Davenport Small Cap and Alger Smallcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smallcap Growth 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 Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smallcap Growth has no effect on the direction of Davenport Small i.e., Davenport Small and Alger Smallcap go up and down completely randomly.

Pair Corralation between Davenport Small and Alger Smallcap

Assuming the 90 days horizon Davenport Small is expected to generate 2.4 times less return on investment than Alger Smallcap. But when comparing it to its historical volatility, Davenport Small Cap is 1.24 times less risky than Alger Smallcap. It trades about 0.02 of its potential returns per unit of risk. Alger Smallcap Growth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  634.00  in Alger Smallcap Growth on October 10, 2024 and sell it today you would earn a total of  21.00  from holding Alger Smallcap Growth or generate 3.31% 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 Smallcap Growth

Davenport Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davenport Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Smallcap Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smallcap Growth are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Alger Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davenport Small and Alger Smallcap

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

The idea behind Davenport Small Cap and Alger Smallcap Growth 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.