Correlation Between Rational Defensive and Alger International

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

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

Diversification Opportunities for Rational Defensive and Alger International

-0.3

Correlation Coefficient

Rational Defensive  Alger International

Very good diversification

The 3 months correlation between Rational and ALGER is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Alger International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger International and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Alger International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger International has no effect on the direction of Rational Defensive i.e., Rational Defensive and Alger International go up and down completely randomly.

Pair Corralation between Rational Defensive and Alger International

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.14 times more return on investment than Alger International. However, Rational Defensive is 1.14 times more volatile than Alger International Growth. It trades about 0.13 of its potential returns per unit of risk. Alger International Growth is currently generating about 0.02 per unit of risk. If you would invest  3,439  in Rational Defensive Growth on August 31, 2024 and sell it today you would earn a total of  588.00  from holding Rational Defensive Growth or generate 17.1% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Alger International Growth

Rational Defensive Growth

Risk-Adjusted Performance

18 of 100

Solid

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

Alger International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alger International Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Alger International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Defensive and Alger International

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

The idea behind Rational Defensive Growth and Alger International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.