Correlation Between Alger Spectra and Alger Concentrated

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

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

Diversification Opportunities for Alger Spectra and Alger Concentrated

1.0

Correlation Coefficient

Alger Spectra  Alger Concentrated

No risk reduction

The 3 months correlation between Alger and Alger is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Alger Spectra and Alger Concentrated Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Concentrated Equity and Alger Spectra 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 Spectra are associated (or correlated) with Alger Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Concentrated Equity has no effect on the direction of Alger Spectra i.e., Alger Spectra and Alger Concentrated go up and down completely randomly.

Pair Corralation between Alger Spectra and Alger Concentrated

Assuming the 90 days horizon Alger Spectra is expected to generate 1.04 times less return on investment than Alger Concentrated. But when comparing it to its historical volatility, Alger Spectra is 1.02 times less risky than Alger Concentrated. It trades about 0.25 of its potential returns per unit of risk. Alger Concentrated Equity is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,068  in Alger Concentrated Equity on August 31, 2024 and sell it today you would earn a total of  213.00  from holding Alger Concentrated Equity or generate 19.94% return on investment over 90 days.

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

Alger Spectra  vs.  Alger Concentrated Equity

Alger Spectra

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Spectra are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Spectra showed solid returns over the last few months and may actually be approaching a breakup point.

Alger Concentrated Equity

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Concentrated Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Concentrated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alger Spectra and Alger Concentrated

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

The idea behind Alger Spectra and Alger Concentrated Equity 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.