Correlation Between Alger Smallcap and Commonwealth Real

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

By analyzing existing cross correlation between Alger Smallcap Growth and Commonwealth Real Estate, you can compare the effects of market volatilities on Alger Smallcap and Commonwealth Real 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 Smallcap with a short position of Commonwealth Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Smallcap and Commonwealth Real.

Diversification Opportunities for Alger Smallcap and Commonwealth Real

0.5

Correlation Coefficient

Alger Smallcap  Commonwealth Real

Very weak diversification

The 3 months correlation between Alger and Commonwealth is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alger Smallcap Growth and Commonwealth Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Real Estate and Alger Smallcap 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 Smallcap Growth are associated (or correlated) with Commonwealth Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Real Estate has no effect on the direction of Alger Smallcap i.e., Alger Smallcap and Commonwealth Real go up and down completely randomly.

Pair Corralation between Alger Smallcap and Commonwealth Real

Assuming the 90 days horizon Alger Smallcap Growth is expected to generate 1.56 times more return on investment than Commonwealth Real. However, Alger Smallcap is 1.56 times more volatile than Commonwealth Real Estate. It trades about 0.19 of its potential returns per unit of risk. Commonwealth Real Estate is currently generating about 0.11 per unit of risk. If you would invest  980.00  in Alger Smallcap Growth on September 5, 2024 and sell it today you would earn a total of  152.00  from holding Alger Smallcap Growth or generate 15.51% return on investment over 90 days.

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

Alger Smallcap Growth  vs.  Commonwealth Real Estate

Alger Smallcap Growth

Risk-Adjusted Performance

14 of 100

Good

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

Commonwealth Real Estate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Real Estate are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Commonwealth Real 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 Smallcap and Commonwealth Real

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

The idea behind Alger Smallcap Growth and Commonwealth Real Estate 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .