Correlation Between Virtus Kar and Alger Small

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

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

Diversification Opportunities for Virtus Kar and Alger Small

0.95

Correlation Coefficient

Virtus Kar  Alger Small

Almost no diversification

The 3 months correlation between Virtus and Alger is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Mid Cap and Alger Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Small Cap and Virtus Kar 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 Virtus Kar Mid Cap are associated (or correlated) with Alger Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Small Cap has no effect on the direction of Virtus Kar i.e., Virtus Kar and Alger Small go up and down completely randomly.

Pair Corralation between Virtus Kar and Alger Small

Assuming the 90 days horizon Virtus Kar is expected to generate 2.72 times less return on investment than Alger Small. But when comparing it to its historical volatility, Virtus Kar Mid Cap is 1.53 times less risky than Alger Small. It trades about 0.07 of its potential returns per unit of risk. Alger Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,965  in Alger Small Cap on September 19, 2024 and sell it today you would earn a total of  222.00  from holding Alger Small Cap or generate 11.3% return on investment over 90 days.

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

Virtus Kar Mid Cap  vs.  Alger Small Cap

Virtus Kar Mid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Mid Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Virtus Kar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Small Cap

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Virtus Kar and Alger Small

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

The idea behind Virtus Kar Mid Cap and Alger Small Cap 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.