Correlation Between Alger Midcap and Mfs Mid

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

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

Diversification Opportunities for Alger Midcap and Mfs Mid

0.79

Correlation Coefficient

Alger Midcap  Mfs Mid

Poor diversification

The 3 months correlation between Alger and Mfs is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alger Midcap Growth and Mfs Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Mid Cap and Alger Midcap 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 Midcap Growth are associated (or correlated) with Mfs Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Mid Cap has no effect on the direction of Alger Midcap i.e., Alger Midcap and Mfs Mid go up and down completely randomly.

Pair Corralation between Alger Midcap and Mfs Mid

Assuming the 90 days horizon Alger Midcap is expected to generate 1.39 times less return on investment than Mfs Mid. In addition to that, Alger Midcap is 1.44 times more volatile than Mfs Mid Cap. It trades about 0.09 of its total potential returns per unit of risk. Mfs Mid Cap is currently generating about 0.18 per unit of volatility. If you would invest  3,122  in Mfs Mid Cap on February 20, 2024 and sell it today you would earn a total of  250.00  from holding Mfs Mid Cap or generate 8.01% return on investment over 90 days.

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

Alger Midcap Growth  vs.  Mfs Mid Cap

Alger Midcap Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Midcap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Alger Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Mid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Mid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Mfs Mid may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Alger Midcap and Mfs Mid

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

The idea behind Alger Midcap Growth and Mfs Mid Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.