Correlation Between Pender Real and Alger Large

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

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

Diversification Opportunities for Pender Real and Alger Large

0.76

Correlation Coefficient

Pender Real  Alger Large

Poor diversification

The 3 months correlation between Pender and Alger is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pender Real Estate and Alger Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Large Cap and Pender Real 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 Pender Real Estate are associated (or correlated) with Alger Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Large Cap has no effect on the direction of Pender Real i.e., Pender Real and Alger Large go up and down completely randomly.

Pair Corralation between Pender Real and Alger Large

Assuming the 90 days horizon Pender Real Estate is expected to generate 0.12 times more return on investment than Alger Large. However, Pender Real Estate is 8.25 times less risky than Alger Large. It trades about -0.05 of its potential returns per unit of risk. Alger Large Cap is currently generating about -0.01 per unit of risk. If you would invest  1,005  in Pender Real Estate on October 6, 2024 and sell it today you would lose (2.00) from holding Pender Real Estate or give up 0.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Pender Real Estate  vs.  Alger Large Cap

Pender Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pender Real Estate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pender Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Large Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pender Real and Alger Large

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

The idea behind Pender Real Estate and Alger Large Cap 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.