Correlation Between Heartland Value and Alger Midcap

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

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

Diversification Opportunities for Heartland Value and Alger Midcap

0.83

Correlation Coefficient

Heartland Value  Alger Midcap

Very poor diversification

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

Pair Corralation between Heartland Value and Alger Midcap

Assuming the 90 days horizon Heartland Value is expected to generate 1.81 times less return on investment than Alger Midcap. In addition to that, Heartland Value is 1.27 times more volatile than Alger Midcap Growth. It trades about 0.14 of its total potential returns per unit of risk. Alger Midcap Growth is currently generating about 0.32 per unit of volatility. If you would invest  1,364  in Alger Midcap Growth on September 3, 2024 and sell it today you would earn a total of  280.00  from holding Alger Midcap Growth or generate 20.53% return on investment over 90 days.

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

Heartland Value Plus  vs.  Alger Midcap Growth

Heartland Value Plus

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Plus are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Heartland Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alger Midcap Growth

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Midcap Growth are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Midcap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heartland Value and Alger Midcap

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

The idea behind Heartland Value Plus and Alger Midcap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.