Correlation Between Palm Valley and Alger Midcap

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

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

Diversification Opportunities for Palm Valley and Alger Midcap

0.64

Correlation Coefficient

Palm Valley  Alger Midcap

Poor diversification

The 3 months correlation between Palm and Alger is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Palm Valley Capital and Alger Midcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Midcap Growth and Palm Valley 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 Palm Valley Capital are associated (or correlated) with Alger Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Midcap Growth has no effect on the direction of Palm Valley i.e., Palm Valley and Alger Midcap go up and down completely randomly.

Pair Corralation between Palm Valley and Alger Midcap

Assuming the 90 days horizon Palm Valley is expected to generate 14.46 times less return on investment than Alger Midcap. But when comparing it to its historical volatility, Palm Valley Capital is 6.0 times less risky than Alger Midcap. It trades about 0.13 of its potential returns per unit of risk. Alger Midcap Growth is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,364  in Alger Midcap Growth on September 2, 2024 and sell it today you would earn a total of  280.00  from holding Alger Midcap Growth or generate 20.53% return on investment over 90 days.

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

Palm Valley Capital  vs.  Alger Midcap Growth

Palm Valley Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palm Valley Capital are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Palm Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alger Midcap Growth

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Midcap Growth are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Midcap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palm Valley and Alger Midcap

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

The idea behind Palm Valley Capital and Alger Midcap Growth 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.