Correlation Between Vanguard Financials and Alger Weatherbie

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

By analyzing existing cross correlation between Vanguard Financials Index and Alger Weatherbie Specialized, you can compare the effects of market volatilities on Vanguard Financials and Alger Weatherbie 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 Vanguard Financials with a short position of Alger Weatherbie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Alger Weatherbie.

Diversification Opportunities for Vanguard Financials and Alger Weatherbie

0.89

Correlation Coefficient

Vanguard Financials  Alger Weatherbie

Very poor diversification

The 3 months correlation between VANGUARD and Alger is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Alger Weatherbie Specialized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Weatherbie Spe and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with Alger Weatherbie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Weatherbie Spe has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Alger Weatherbie go up and down completely randomly.

Pair Corralation between Vanguard Financials and Alger Weatherbie

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 0.96 times more return on investment than Alger Weatherbie. However, Vanguard Financials Index is 1.04 times less risky than Alger Weatherbie. It trades about 0.2 of its potential returns per unit of risk. Alger Weatherbie Specialized is currently generating about 0.17 per unit of risk. If you would invest  5,473  in Vanguard Financials Index on August 31, 2024 and sell it today you would earn a total of  845.00  from holding Vanguard Financials Index or generate 15.44% return on investment over 90 days.

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

Vanguard Financials Index  vs.  Alger Weatherbie Specialized

Vanguard Financials Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials showed solid returns over the last few months and may actually be approaching a breakup point.

Alger Weatherbie Spe

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Weatherbie Specialized are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Alger Weatherbie showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Financials and Alger Weatherbie

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

The idea behind Vanguard Financials Index and Alger Weatherbie Specialized 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.