Correlation Between VMware and Alger Dynamic

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

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

Diversification Opportunities for VMware and Alger Dynamic

0.13

Correlation Coefficient

VMware  Alger Dynamic

Average diversification

The 3 months correlation between VMware and Alger is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Alger Dynamic Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Dynamic Opport and VMware 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 VMware Inc are associated (or correlated) with Alger Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Dynamic Opport has no effect on the direction of VMware i.e., VMware and Alger Dynamic go up and down completely randomly.

Pair Corralation between VMware and Alger Dynamic

Considering the 90-day investment horizon VMware Inc is expected to generate 3.22 times more return on investment than Alger Dynamic. However, VMware is 3.22 times more volatile than Alger Dynamic Opportunities. It trades about 0.06 of its potential returns per unit of risk. Alger Dynamic Opportunities is currently generating about 0.06 per unit of risk. If you would invest  9,495  in VMware Inc on February 8, 2024 and sell it today you would earn a total of  4,753  from holding VMware Inc or generate 50.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.13%
Values	Daily Returns

VMware Inc  vs.  Alger Dynamic Opportunities

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Alger Dynamic Opport

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Dynamic Opportunities are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VMware and Alger Dynamic

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

The idea behind VMware Inc and Alger Dynamic Opportunities 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.