Correlation Between Northern Small and Valic Company
Can any of the company-specific risk be diversified away by investing in both Northern Small 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 Northern Small and Valic Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and Valic Company I, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Valic Company.
Diversification Opportunities for Northern Small and Valic Company
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Northern and Valic is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap 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 Northern Small 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 Northern Small Cap 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 Northern Small i.e., Northern Small and Valic Company go up and down completely randomly.
Pair Corralation between Northern Small and Valic Company
Assuming the 90 days horizon Northern Small Cap is expected to generate 0.98 times more return on investment than Valic Company. However, Northern Small Cap is 1.02 times less risky than Valic Company. It trades about 0.05 of its potential returns per unit of risk. Valic Company I is currently generating about 0.05 per unit of risk. If you would invest 1,723 in Northern Small Cap on August 28, 2024 and sell it today you would earn a total of 526.00 from holding Northern Small Cap or generate 30.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Valic Company I
Performance |
| Timeline |
| Northern Small Cap |
| Valic Company I |
Northern Small and Valic Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Valic Company
The main advantage of trading using opposite Northern Small and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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.| Northern Small vs. American Beacon Large | Northern Small vs. Harbor International Fund | Northern Small vs. Credit Suisse Modity | Northern Small vs. Metropolitan West Total |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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