Correlation Between Pacific Capital and Alger Large

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

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

Diversification Opportunities for Pacific Capital and Alger Large

-0.07

Correlation Coefficient

Pacific Capital  Alger Large

Good diversification

The 3 months correlation between Pacific and Alger is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Capital Tax Free 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 Pacific Capital 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 Pacific Capital Tax Free 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 Pacific Capital i.e., Pacific Capital and Alger Large go up and down completely randomly.

Pair Corralation between Pacific Capital and Alger Large

Assuming the 90 days horizon Pacific Capital Tax Free is expected to under-perform the Alger Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pacific Capital Tax Free is 8.77 times less risky than Alger Large. The mutual fund trades about -0.27 of its potential returns per unit of risk. The Alger Large Cap is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9,319  in Alger Large Cap on October 6, 2024 and sell it today you would lose (49.00) from holding Alger Large Cap or give up 0.53% of portfolio value over 90 days.

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

Pacific Capital Tax Free  vs.  Alger Large Cap

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Pacific Capital 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 Pacific Capital and Alger Large

The main advantage of trading using opposite Pacific Capital and Alger Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Capital 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 Pacific Capital Tax Free 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.