Correlation Between Guidemark(r) Small/mid and Alger Capital

Can any of the company-specific risk be diversified away by investing in both Guidemark(r) Small/mid and Alger Capital 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 Guidemark(r) Small/mid and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guidemark Smallmid Cap and Alger Capital Appreciation, you can compare the effects of market volatilities on Guidemark(r) Small/mid and Alger Capital 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 Guidemark(r) Small/mid with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark(r) Small/mid and Alger Capital.

Diversification Opportunities for Guidemark(r) Small/mid and Alger Capital

0.8

Correlation Coefficient

Guidemark(r) Small/mid  Alger Capital

Very poor diversification

The 3 months correlation between Guidemark(r) and Alger is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Smallmid Cap and Alger Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Capital Apprec and Guidemark(r) Small/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 Guidemark Smallmid Cap are associated (or correlated) with Alger Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Capital Apprec has no effect on the direction of Guidemark(r) Small/mid i.e., Guidemark(r) Small/mid and Alger Capital go up and down completely randomly.

Pair Corralation between Guidemark(r) Small/mid and Alger Capital

Assuming the 90 days horizon Guidemark Smallmid Cap is expected to generate 0.69 times more return on investment than Alger Capital. However, Guidemark Smallmid Cap is 1.45 times less risky than Alger Capital. It trades about -0.03 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about -0.03 per unit of risk. If you would invest  2,094  in Guidemark Smallmid Cap on October 22, 2024 and sell it today you would lose (80.00) from holding Guidemark Smallmid Cap or give up 3.82% of portfolio value over 90 days.

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

Guidemark Smallmid Cap  vs.  Alger Capital Appreciation

Guidemark Smallmid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Guidemark(r) Small/mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Capital Apprec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guidemark(r) Small/mid and Alger Capital

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

The idea behind Guidemark Smallmid Cap and Alger Capital Appreciation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.