Correlation Between Amazon and Alger Funds

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

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

Diversification Opportunities for Amazon and Alger Funds

0.83

Correlation Coefficient

Amazon  Alger Funds

Very poor diversification

The 3 months correlation between Amazon and Alger is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and The Alger Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Funds and Amazon 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 Amazon Inc are associated (or correlated) with Alger Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Funds has no effect on the direction of Amazon i.e., Amazon and Alger Funds go up and down completely randomly.

Pair Corralation between Amazon and Alger Funds

Given the investment horizon of 90 days Amazon is expected to generate 1.16 times less return on investment than Alger Funds. In addition to that, Amazon is 1.16 times more volatile than The Alger Funds. It trades about 0.22 of its total potential returns per unit of risk. The Alger Funds is currently generating about 0.3 per unit of volatility. If you would invest  1,086  in The Alger Funds on September 5, 2024 and sell it today you would earn a total of  111.00  from holding The Alger Funds or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Amazon Inc  vs.  The Alger Funds

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Alger Funds

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Amazon and Alger Funds

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

The idea behind Amazon Inc and The Alger Funds 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.