Correlation Between Alger Small and Alger 35

Can any of the company-specific risk be diversified away by investing in both Alger Small and Alger 35 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 Alger 35 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 Alger 35 Fund, you can compare the effects of market volatilities on Alger Small and Alger 35 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 Alger 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Small and Alger 35.

Diversification Opportunities for Alger Small and Alger 35

0.96

Correlation Coefficient

Alger Small  Alger 35

Almost no diversification

The 3 months correlation between Alger and Alger is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Alger 35 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger 35 Fund 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 Alger 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger 35 Fund has no effect on the direction of Alger Small i.e., Alger Small and Alger 35 go up and down completely randomly.

Pair Corralation between Alger Small and Alger 35

Assuming the 90 days horizon Alger Small is expected to generate 1.24 times less return on investment than Alger 35. In addition to that, Alger Small is 1.12 times more volatile than Alger 35 Fund. It trades about 0.23 of its total potential returns per unit of risk. Alger 35 Fund is currently generating about 0.32 per unit of volatility. If you would invest  1,392  in Alger 35 Fund on September 3, 2024 and sell it today you would earn a total of  396.00  from holding Alger 35 Fund or generate 28.45% return on investment over 90 days.

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

Alger Small Cap  vs.  Alger 35 Fund

Alger Small Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Small Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Small showed solid returns over the last few months and may actually be approaching a breakup point.

Alger 35 Fund

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger 35 Fund 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 35 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alger Small and Alger 35

The main advantage of trading using opposite Alger Small and Alger 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Small position performs unexpectedly, Alger 35 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 35 will offset losses from the drop in Alger 35's long position.

The idea behind Alger Small Cap and Alger 35 Fund 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..