Correlation Between Alger Small and Needham Aggressive

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

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

Diversification Opportunities for Alger Small and Needham Aggressive

0.76

Correlation Coefficient

Alger Small  Needham Aggressive

Poor diversification

The 3 months correlation between Alger and Needham is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Needham Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Aggressive Growth and Alger Small 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 Small Cap are associated (or correlated) with Needham Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Aggressive Growth has no effect on the direction of Alger Small i.e., Alger Small and Needham Aggressive go up and down completely randomly.

Pair Corralation between Alger Small and Needham Aggressive

Assuming the 90 days horizon Alger Small Cap is expected to generate 1.07 times more return on investment than Needham Aggressive. However, Alger Small is 1.07 times more volatile than Needham Aggressive Growth. It trades about 0.2 of its potential returns per unit of risk. Needham Aggressive Growth is currently generating about 0.09 per unit of risk. If you would invest  1,512  in Alger Small Cap on September 13, 2024 and sell it today you would earn a total of  279.00  from holding Alger Small Cap or generate 18.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Alger Small Cap  vs.  Needham Aggressive Growth

Alger Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Alger Small showed solid returns over the last few months and may actually be approaching a breakup point.

Needham Aggressive Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Aggressive Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Needham Aggressive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alger Small and Needham Aggressive

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

The idea behind Alger Small Cap and Needham Aggressive Growth 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.