Correlation Between State Street and Alger Midcap

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

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

Diversification Opportunities for State Street and Alger Midcap

0.97

Correlation Coefficient

State Street  Alger Midcap

Almost no diversification

The 3 months correlation between State and Alger is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding State Street Smallmid 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 State Street 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 State Street Smallmid 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 State Street i.e., State Street and Alger Midcap go up and down completely randomly.

Pair Corralation between State Street and Alger Midcap

Assuming the 90 days horizon State Street Smallmid is expected to under-perform the Alger Midcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, State Street Smallmid is 1.14 times less risky than Alger Midcap. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Alger Midcap Growth is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  2,608  in Alger Midcap Growth on September 27, 2024 and sell it today you would lose (124.00) from holding Alger Midcap Growth or give up 4.75% of portfolio value over 90 days.

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

State Street Smallmid  vs.  Alger Midcap Growth

State Street Smallmid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Smallmid are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Midcap Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Midcap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Street and Alger Midcap

The main advantage of trading using opposite State Street and Alger Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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 State Street Smallmid 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 Transaction History module to view history of all your transactions and understand their impact on performance.