Correlation Between Alger Small and Alger Global

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

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

Diversification Opportunities for Alger Small and Alger Global

0.94

Correlation Coefficient

Alger Small  Alger Global

Almost no diversification

The 3 months correlation between Alger and Alger is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Alger Small Cap and Alger Global Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Global Growth and Alger 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 Alger Small Cap are associated (or correlated) with Alger Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Global Growth has no effect on the direction of Alger Small i.e., Alger Small and Alger Global go up and down completely randomly.

Pair Corralation between Alger Small and Alger Global

Assuming the 90 days horizon Alger Small Cap is expected to generate 1.47 times more return on investment than Alger Global. However, Alger Small is 1.47 times more volatile than Alger Global Growth. It trades about 0.1 of its potential returns per unit of risk. Alger Global Growth is currently generating about 0.08 per unit of risk. If you would invest  1,479  in Alger Small Cap on September 12, 2024 and sell it today you would earn a total of  290.00  from holding Alger Small Cap or generate 19.61% return on investment over 90 days.

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

Alger Small Cap  vs.  Alger Global Growth

Alger Small Cap

Risk-Adjusted Performance

15 of 100

Good

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

Alger Global Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Global Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Alger Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alger Small and Alger Global

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

The idea behind Alger Small Cap and Alger Global 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.