Correlation Between Alger Mid and F/m Investments

Can any of the company-specific risk be diversified away by investing in both Alger Mid and F/m Investments 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 Alger Mid and F/m Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Alger Mid and F/m Investments

0.95

Correlation Coefficient

Alger Mid  F/m Investments

Almost no diversification

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

Pair Corralation between Alger Mid and F/m Investments

Assuming the 90 days horizon Alger Mid Cap is expected to generate 1.14 times more return on investment than F/m Investments. However, Alger Mid is 1.14 times more volatile than Fm Investments Large. It trades about 0.33 of its potential returns per unit of risk. Fm Investments Large is currently generating about 0.2 per unit of risk. If you would invest  1,937  in Alger Mid Cap on September 8, 2024 and sell it today you would earn a total of  299.00  from holding Alger Mid Cap or generate 15.44% return on investment over 90 days.

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

Alger Mid Cap  vs.  Fm Investments Large

Alger Mid Cap

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Mid Cap are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Fm Investments Large

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fm Investments Large are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, F/m Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alger Mid and F/m Investments

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

The idea behind Alger Mid Cap and Fm Investments Large 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 Transaction History module to view history of all your transactions and understand their impact on performance.