Correlation Between Balanced Fund and Alger Smallcap

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Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Alger Smallcap 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 Balanced Fund and Alger Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Retail and Alger Smallcap Growth, you can compare the effects of market volatilities on Balanced Fund and Alger Smallcap 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 Balanced Fund with a short position of Alger Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Alger Smallcap.

Diversification Opportunities for Balanced Fund and Alger Smallcap

BalancedAlgerDiversified AwayBalancedAlgerDiversified Away100%
0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Balanced and Alger is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Alger Smallcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smallcap Growth and Balanced Fund 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 Balanced Fund Retail are associated (or correlated) with Alger Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smallcap Growth has no effect on the direction of Balanced Fund i.e., Balanced Fund and Alger Smallcap go up and down completely randomly.

Pair Corralation between Balanced Fund and Alger Smallcap

Assuming the 90 days horizon Balanced Fund is expected to generate 2.58 times less return on investment than Alger Smallcap. But when comparing it to its historical volatility, Balanced Fund Retail is 2.63 times less risky than Alger Smallcap. It trades about 0.1 of its potential returns per unit of risk. Alger Smallcap Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,078  in Alger Smallcap Growth on September 15, 2024 and sell it today you would earn a total of  85.00  from holding Alger Smallcap Growth or generate 7.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Balanced Fund Retail  vs.  Alger Smallcap Growth

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 51015
JavaScript chart by amCharts 3.21.15FLDFX ASCZX
       Timeline  
Balanced Fund Retail 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Retail are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec14.114.214.314.414.514.6
Alger Smallcap Growth 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smallcap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Smallcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec10.81111.211.411.611.812

Balanced Fund and Alger Smallcap Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.49-1.09-0.69-0.290.0340.390.791.191.591.99 0.51.01.5
JavaScript chart by amCharts 3.21.15FLDFX ASCZX
       Returns  

Pair Trading with Balanced Fund and Alger Smallcap

The main advantage of trading using opposite Balanced Fund and Alger Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Alger Smallcap 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 Smallcap will offset losses from the drop in Alger Smallcap's long position.
The idea behind Balanced Fund Retail and Alger Smallcap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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