Correlation Between Alger Mid and Alger Large

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

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

Diversification Opportunities for Alger Mid and Alger Large

0.99

Correlation Coefficient

Alger Mid  Alger Large

No risk reduction

The 3 months correlation between Alger and Alger is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Alger Mid Cap and Alger Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Large Cap and Alger Mid 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 Mid Cap are associated (or correlated) with Alger Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Large Cap has no effect on the direction of Alger Mid i.e., Alger Mid and Alger Large go up and down completely randomly.

Pair Corralation between Alger Mid and Alger Large

Assuming the 90 days horizon Alger Mid is expected to generate 1.0 times less return on investment than Alger Large. But when comparing it to its historical volatility, Alger Mid Cap is 1.22 times less risky than Alger Large. It trades about 0.32 of its potential returns per unit of risk. Alger Large Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. 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 Mid Cap  vs.  Alger Large Cap

Alger Mid Cap

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Mid showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Alger Mid and Alger Large

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

The idea behind Alger Mid Cap and Alger Large 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.