Correlation Between Pace Large and Alger Funds

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

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

Diversification Opportunities for Pace Large and Alger Funds

0.19

Correlation Coefficient

Pace Large  Alger Funds

Average diversification

The 3 months correlation between Pace and Alger is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Alger Funds Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Funds Mid and Pace Large 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 Pace Large Value are associated (or correlated) with Alger Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Funds Mid has no effect on the direction of Pace Large i.e., Pace Large and Alger Funds go up and down completely randomly.

Pair Corralation between Pace Large and Alger Funds

Assuming the 90 days horizon Pace Large Value is expected to generate 0.37 times more return on investment than Alger Funds. However, Pace Large Value is 2.7 times less risky than Alger Funds. It trades about 0.15 of its potential returns per unit of risk. Alger Funds Mid is currently generating about -0.09 per unit of risk. If you would invest  1,992  in Pace Large Value on December 19, 2024 and sell it today you would earn a total of  137.00  from holding Pace Large Value or generate 6.88% return on investment over 90 days.

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

Pace Large Value  vs.  Alger Funds Mid

Pace Large Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Large Value are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pace Large may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alger Funds Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger Funds Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pace Large and Alger Funds

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

The idea behind Pace Large Value and Alger Funds Mid 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.