Correlation Between F/m Investments and Alger Capital

Can any of the company-specific risk be diversified away by investing in both F/m Investments 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 F/m Investments and Alger Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fm Investments Large and Alger Capital Appreciation, you can compare the effects of market volatilities on F/m Investments 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 F/m Investments with a short position of Alger Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of F/m Investments and Alger Capital.

Diversification Opportunities for F/m Investments and Alger Capital

0.84

Correlation Coefficient

F/m Investments  Alger Capital

Very poor diversification

The 3 months correlation between F/m and Alger is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fm Investments Large 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 F/m Investments 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 Fm Investments Large 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 F/m Investments i.e., F/m Investments and Alger Capital go up and down completely randomly.

Pair Corralation between F/m Investments and Alger Capital

Assuming the 90 days horizon Fm Investments Large is expected to under-perform the Alger Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fm Investments Large is 1.07 times less risky than Alger Capital. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Alger Capital Appreciation is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,401  in Alger Capital Appreciation on December 28, 2024 and sell it today you would lose (431.00) from holding Alger Capital Appreciation or give up 12.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Fm Investments Large  vs.  Alger Capital Appreciation

Fm Investments Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fm Investments Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Alger Capital Apprec

Risk-Adjusted Performance

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with F/m Investments and Alger Capital

The main advantage of trading using opposite F/m Investments and Alger Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F/m Investments 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 Fm Investments Large 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.