Correlation Between Small Cap and Alger Spectra

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

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

Diversification Opportunities for Small Cap and Alger Spectra

0.91

Correlation Coefficient

Small Cap  Alger Spectra

Almost no diversification

The 3 months correlation between Small and Alger is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Alger Spectra Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Spectra and Small Cap 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 Small Cap Equity are associated (or correlated) with Alger Spectra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Spectra has no effect on the direction of Small Cap i.e., Small Cap and Alger Spectra go up and down completely randomly.

Pair Corralation between Small Cap and Alger Spectra

Assuming the 90 days horizon Small Cap is expected to generate 1.72 times less return on investment than Alger Spectra. But when comparing it to its historical volatility, Small Cap Equity is 1.06 times less risky than Alger Spectra. It trades about 0.09 of its potential returns per unit of risk. Alger Spectra Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,023  in Alger Spectra Fund on September 4, 2024 and sell it today you would earn a total of  1,081  from holding Alger Spectra Fund or generate 53.44% return on investment over 90 days.

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

Small Cap Equity  vs.  Alger Spectra Fund

Small Cap Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Alger Spectra

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Spectra Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Alger Spectra showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and Alger Spectra

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

The idea behind Small Cap Equity and Alger Spectra Fund 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.