Correlation Between Alger Health and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Alger Health and Basic Materials 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 Health and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Health Sciences and Basic Materials Fund, you can compare the effects of market volatilities on Alger Health and Basic Materials 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 Health with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Basic Materials.
Diversification Opportunities for Alger Health and Basic Materials
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alger and Basic is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials and Alger Health 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 Health Sciences are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Alger Health i.e., Alger Health and Basic Materials go up and down completely randomly.
Pair Corralation between Alger Health and Basic Materials
Assuming the 90 days horizon Alger Health is expected to generate 2.69 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Alger Health Sciences is 1.34 times less risky than Basic Materials. It trades about 0.11 of its potential returns per unit of risk. Basic Materials Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,816 in Basic Materials Fund on April 3, 2025 and sell it today you would earn a total of 248.00 from holding Basic Materials Fund or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Health Sciences vs. Basic Materials Fund
Performance |
| Timeline |
| Alger Health Sciences |
| Basic Materials |
Alger Health and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Basic Materials
The main advantage of trading using opposite Alger Health and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Alger Health vs. T Rowe Price | Alger Health vs. Gmo International Equity | Alger Health vs. Hartford International Equity | Alger Health vs. Enhanced Fixed Income |
| Basic Materials vs. Vanguard Health Care | Basic Materials vs. Baron Health Care | Basic Materials vs. Putnam Global Health | Basic Materials vs. Alger Health Sciences |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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