Correlation Between First Trust and Alger Mid

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

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

Diversification Opportunities for First Trust and Alger Mid

0.85

Correlation Coefficient

First Trust  Alger Mid

Very poor diversification

The 3 months correlation between First and Alger is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed 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 First Trust 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 First Trust Managed 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 First Trust i.e., First Trust and Alger Mid go up and down completely randomly.

Pair Corralation between First Trust and Alger Mid

Considering the 90-day investment horizon First Trust Managed is expected to generate 0.26 times more return on investment than Alger Mid. However, First Trust Managed is 3.88 times less risky than Alger Mid. It trades about 0.08 of its potential returns per unit of risk. Alger Mid Cap is currently generating about -0.1 per unit of risk. If you would invest  4,796  in First Trust Managed on October 7, 2024 and sell it today you would earn a total of  43.00  from holding First Trust Managed or generate 0.9% return on investment over 90 days.

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

First Trust Managed  vs.  Alger Mid Cap

First Trust Managed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alger Mid Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Alger Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Alger Mid

The main advantage of trading using opposite First Trust and Alger Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Managed 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.