Correlation Between Alger Large and Alger Ai

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

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

Diversification Opportunities for Alger Large and Alger Ai

1.0

Correlation Coefficient

Alger Large  Alger Ai

No risk reduction

The 3 months correlation between Alger and Alger is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Alger Large Cap and Alger Ai Enablers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Ai Enablers and Alger Large 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 Alger Large Cap are associated (or correlated) with Alger Ai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Ai Enablers has no effect on the direction of Alger Large i.e., Alger Large and Alger Ai go up and down completely randomly.

Pair Corralation between Alger Large and Alger Ai

Assuming the 90 days horizon Alger Large is expected to generate 1.13 times less return on investment than Alger Ai. But when comparing it to its historical volatility, Alger Large Cap is 1.05 times less risky than Alger Ai. It trades about 0.26 of its potential returns per unit of risk. Alger Ai Enablers is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Alger Ai Enablers on September 3, 2024 and sell it today you would earn a total of  254.00  from holding Alger Ai Enablers or generate 23.94% return on investment over 90 days.

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

Alger Large Cap  vs.  Alger Ai Enablers

Alger Large Cap

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Large Cap are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Large showed solid returns over the last few months and may actually be approaching a breakup point.

Alger Ai Enablers

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Ai Enablers are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Alger Ai showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alger Large and Alger Ai

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

The idea behind Alger Large Cap and Alger Ai Enablers 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.