Correlation Between Alger Spectra and First Trust

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

By analyzing existing cross correlation between Alger Spectra Fund and First Trust Short, you can compare the effects of market volatilities on Alger Spectra and First Trust 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 Spectra with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Spectra and First Trust.

Diversification Opportunities for Alger Spectra and First Trust

0.96

Correlation Coefficient

Alger Spectra  First Trust

Almost no diversification

The 3 months correlation between Alger and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Alger Spectra Fund and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Alger Spectra 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 Spectra Fund are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Alger Spectra i.e., Alger Spectra and First Trust go up and down completely randomly.

Pair Corralation between Alger Spectra and First Trust

Assuming the 90 days horizon Alger Spectra Fund is expected to generate 8.5 times more return on investment than First Trust. However, Alger Spectra is 8.5 times more volatile than First Trust Short. It trades about 0.36 of its potential returns per unit of risk. First Trust Short is currently generating about 0.28 per unit of risk. If you would invest  2,668  in Alger Spectra Fund on May 3, 2025 and sell it today you would earn a total of  701.00  from holding Alger Spectra Fund or generate 26.27% return on investment over 90 days.

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

Alger Spectra Fund  vs.  First Trust Short

Alger Spectra

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Spectra Fund are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Alger Spectra showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust 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 Spectra and First Trust

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

The idea behind Alger Spectra Fund and First Trust Short 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.