Correlation Between Vanguard Energy and Alger Mid

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

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

Diversification Opportunities for Vanguard Energy and Alger Mid

0.45

Correlation Coefficient

Vanguard Energy  Alger Mid

Very weak diversification

The 3 months correlation between Vanguard and Alger is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index and Alger Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Mid Cap and Vanguard Energy 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 Energy Index are associated (or correlated) with Alger Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Mid Cap has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Alger Mid go up and down completely randomly.

Pair Corralation between Vanguard Energy and Alger Mid

Assuming the 90 days horizon Vanguard Energy is expected to generate 1.79 times less return on investment than Alger Mid. But when comparing it to its historical volatility, Vanguard Energy Index is 1.14 times less risky than Alger Mid. It trades about 0.08 of its potential returns per unit of risk. Alger Mid Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,977  in Alger Mid Cap on October 26, 2024 and sell it today you would earn a total of  203.00  from holding Alger Mid Cap or generate 10.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Vanguard Energy Index  vs.  Alger Mid Cap

Vanguard Energy Index

Risk-Adjusted Performance

6 of 100

Modest

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

Alger Mid Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Energy and Alger Mid

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

The idea behind Vanguard Energy Index and Alger Mid 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.