Correlation Between American Balanced and Valic Company
Can any of the company-specific risk be diversified away by investing in both American Balanced and Valic Company 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 American Balanced and Valic Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Valic Company I, you can compare the effects of market volatilities on American Balanced and Valic Company 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 American Balanced with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Valic Company.
Diversification Opportunities for American Balanced and Valic Company
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Valic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Valic Company I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valic Company I and American Balanced 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 American Balanced Fund are associated (or correlated) with Valic Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valic Company I has no effect on the direction of American Balanced i.e., American Balanced and Valic Company go up and down completely randomly.
Pair Corralation between American Balanced and Valic Company
Assuming the 90 days horizon American Balanced is expected to generate 1.31 times less return on investment than Valic Company. In addition to that, American Balanced is 1.05 times more volatile than Valic Company I. It trades about 0.05 of its total potential returns per unit of risk. Valic Company I is currently generating about 0.06 per unit of volatility. If you would invest 1,460 in Valic Company I on September 12, 2024 and sell it today you would earn a total of 16.00 from holding Valic Company I or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.62% |
| Values | Daily Returns |
American Balanced Fund vs. Valic Company I
Performance |
| Timeline |
| American Balanced |
| Valic Company I |
American Balanced and Valic Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Valic Company
The main advantage of trading using opposite American Balanced and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Valic Company 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 Valic Company will offset losses from the drop in Valic Company's long position.| American Balanced vs. L Abbett Growth | American Balanced vs. Rational Defensive Growth | American Balanced vs. Smallcap Growth Fund | American Balanced vs. T Rowe Price |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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