Correlation Between Alger Large and Alger Balanced

Can any of the company-specific risk be diversified away by investing in both Alger Large and Alger Balanced 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 Balanced 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 Balanced Portfolio, you can compare the effects of market volatilities on Alger Large and Alger Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Large and Alger Balanced.

Diversification Opportunities for Alger Large and Alger Balanced

0.9

Correlation Coefficient

Alger Large  Alger Balanced

Almost no diversification

The 3 months correlation between Alger and Alger is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alger Large Cap and Alger Balanced Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Balanced Portfolio 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Balanced Portfolio has no effect on the direction of Alger Large i.e., Alger Large and Alger Balanced go up and down completely randomly.

Pair Corralation between Alger Large and Alger Balanced

Assuming the 90 days horizon Alger Large Cap is expected to generate 2.25 times more return on investment than Alger Balanced. However, Alger Large is 2.25 times more volatile than Alger Balanced Portfolio. It trades about 0.26 of its potential returns per unit of risk. Alger Balanced Portfolio is currently generating about 0.14 per unit of risk. If you would invest  7,429  in Alger Large Cap on September 3, 2024 and sell it today you would earn a total of  1,549  from holding Alger Large Cap or generate 20.85% 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 Balanced Portfolio

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 Balanced Portfolio

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Balanced Portfolio are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alger Large and Alger Balanced

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

The idea behind Alger Large Cap and Alger Balanced Portfolio 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.