Correlation Between Ab Small and Alger Capital

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

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

Diversification Opportunities for Ab Small and Alger Capital

0.95

Correlation Coefficient

Ab Small  Alger Capital

Almost no diversification

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

Pair Corralation between Ab Small and Alger Capital

Assuming the 90 days horizon Ab Small is expected to generate 1.5 times less return on investment than Alger Capital. In addition to that, Ab Small is 1.08 times more volatile than Alger Capital Appreciation. It trades about 0.21 of its total potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.34 per unit of volatility. If you would invest  3,099  in Alger Capital Appreciation on September 7, 2024 and sell it today you would earn a total of  826.00  from holding Alger Capital Appreciation or generate 26.65% return on investment over 90 days.

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

Ab Small Cap  vs.  Alger Capital Appreciation

Ab Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Ab Small showed solid returns over the last few months and may actually be approaching a breakup point.

Alger Capital Apprec

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Capital Appreciation are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ab Small and Alger Capital

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

The idea behind Ab Small Cap and Alger Capital Appreciation 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.