Correlation Between Vanguard California and Alger Funds

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

By analyzing existing cross correlation between Vanguard California Long Term and The Alger Funds, you can compare the effects of market volatilities on Vanguard California and Alger Funds 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 Vanguard California with a short position of Alger Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and Alger Funds.

Diversification Opportunities for Vanguard California and Alger Funds

-0.07

Correlation Coefficient

Vanguard California  Alger Funds

Good diversification

The 3 months correlation between VANGUARD and Alger is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Long Term and The Alger Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Funds and Vanguard California 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 Vanguard California Long Term are associated (or correlated) with Alger Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Funds has no effect on the direction of Vanguard California i.e., Vanguard California and Alger Funds go up and down completely randomly.

Pair Corralation between Vanguard California and Alger Funds

Assuming the 90 days horizon Vanguard California is expected to generate 12.8 times less return on investment than Alger Funds. But when comparing it to its historical volatility, Vanguard California Long Term is 4.57 times less risky than Alger Funds. It trades about 0.07 of its potential returns per unit of risk. The Alger Funds is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,039  in The Alger Funds on September 3, 2024 and sell it today you would earn a total of  158.00  from holding The Alger Funds or generate 15.21% return on investment over 90 days.

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

Vanguard California Long Term  vs.  The Alger Funds

Vanguard California

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard California Long Term are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Funds

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Alger Funds 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 Funds showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard California and Alger Funds

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

The idea behind Vanguard California Long Term and The Alger Funds 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.