Correlation Between Alger Capital and Vanguard Institutional

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

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

Diversification Opportunities for Alger Capital and Vanguard Institutional

0.98

Correlation Coefficient

Alger Capital  Vanguard Institutional

Almost no diversification

The 3 months correlation between Alger and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Alger Capital Appreciation and Vanguard Institutional Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Institutional and Alger Capital 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 Capital Appreciation are associated (or correlated) with Vanguard Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Institutional has no effect on the direction of Alger Capital i.e., Alger Capital and Vanguard Institutional go up and down completely randomly.

Pair Corralation between Alger Capital and Vanguard Institutional

Assuming the 90 days horizon Alger Capital Appreciation is expected to generate 1.59 times more return on investment than Vanguard Institutional. However, Alger Capital is 1.59 times more volatile than Vanguard Institutional Total. It trades about 0.29 of its potential returns per unit of risk. Vanguard Institutional Total is currently generating about 0.23 per unit of risk. If you would invest  3,392  in Alger Capital Appreciation on September 5, 2024 and sell it today you would earn a total of  790.00  from holding Alger Capital Appreciation or generate 23.29% return on investment over 90 days.

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

Alger Capital Appreciation  vs.  Vanguard Institutional Total

Alger Capital Apprec

Risk-Adjusted Performance

22 of 100

Solid

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

Vanguard Institutional

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Institutional Total are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Institutional may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alger Capital and Vanguard Institutional

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

The idea behind Alger Capital Appreciation and Vanguard Institutional Total 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.