Correlation Between Short-term Government and Alger Dynamic

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

By analyzing existing cross correlation between Short Term Government Fund and Alger Dynamic Opportunities, you can compare the effects of market volatilities on Short-term Government and Alger Dynamic 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 Short-term Government with a short position of Alger Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Alger Dynamic.

Diversification Opportunities for Short-term Government and Alger Dynamic

0.38

Correlation Coefficient

Short-term Government  Alger Dynamic

Weak diversification

The 3 months correlation between Short-term and Alger is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Alger Dynamic Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Dynamic Opport and Short-term Government 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 Short Term Government Fund are associated (or correlated) with Alger Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Dynamic Opport has no effect on the direction of Short-term Government i.e., Short-term Government and Alger Dynamic go up and down completely randomly.

Pair Corralation between Short-term Government and Alger Dynamic

Assuming the 90 days horizon Short-term Government is expected to generate 37.71 times less return on investment than Alger Dynamic. But when comparing it to its historical volatility, Short Term Government Fund is 7.57 times less risky than Alger Dynamic. It trades about 0.04 of its potential returns per unit of risk. Alger Dynamic Opportunities is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,078  in Alger Dynamic Opportunities on October 23, 2024 and sell it today you would earn a total of  182.00  from holding Alger Dynamic Opportunities or generate 8.76% return on investment over 90 days.

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

Short Term Government Fund  vs.  Alger Dynamic Opportunities

Short Term Government

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Government Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Short-term Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Dynamic Opport

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Dynamic Opportunities are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Dynamic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Short-term Government and Alger Dynamic

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

The idea behind Short Term Government Fund and Alger Dynamic Opportunities 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.