Correlation Between Alger Mid and Franklin Liberty

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

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

Diversification Opportunities for Alger Mid and Franklin Liberty

0.34

Correlation Coefficient

Alger Mid  Franklin Liberty

Weak diversification

The 3 months correlation between Alger and Franklin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alger Mid Cap and Franklin Liberty Systematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Sys and Alger Mid 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 Mid Cap are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Sys has no effect on the direction of Alger Mid i.e., Alger Mid and Franklin Liberty go up and down completely randomly.

Pair Corralation between Alger Mid and Franklin Liberty

Given the investment horizon of 90 days Alger Mid Cap is expected to generate 2.97 times more return on investment than Franklin Liberty. However, Alger Mid is 2.97 times more volatile than Franklin Liberty Systematic. It trades about 0.13 of its potential returns per unit of risk. Franklin Liberty Systematic is currently generating about 0.04 per unit of risk. If you would invest  1,759  in Alger Mid Cap on October 22, 2024 and sell it today you would earn a total of  228.00  from holding Alger Mid Cap or generate 12.96% return on investment over 90 days.

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

Alger Mid Cap  vs.  Franklin Liberty Systematic

Alger Mid Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Alger Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Liberty Sys

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Systematic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Franklin Liberty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alger Mid and Franklin Liberty

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

The idea behind Alger Mid Cap and Franklin Liberty Systematic 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.