Correlation Between Small Cap and Valic Company
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Valic Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Valic Company I, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Valic Company.
Diversification Opportunities for Small Cap and Valic Company
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Valic is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock 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 Small Cap 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Valic Company go up and down completely randomly.
Pair Corralation between Small Cap and Valic Company
Assuming the 90 days horizon Small Cap Stock is expected to generate 2.24 times more return on investment than Valic Company. However, Small Cap is 2.24 times more volatile than Valic Company I. It trades about -0.01 of its potential returns per unit of risk. Valic Company I is currently generating about -0.12 per unit of risk. If you would invest 1,509 in Small Cap Stock on September 13, 2024 and sell it today you would lose (5.00) from holding Small Cap Stock or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Small Cap Stock vs. Valic Company I
Performance |
| Timeline |
| Small Cap Stock |
| Valic Company I |
Small Cap and Valic Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Valic Company
The main advantage of trading using opposite Small Cap and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Guggenheim Managed Futures | Small Cap vs. Simt Multi Asset Inflation | Small Cap vs. Goldman Sachs Inflation | Small Cap vs. Loomis Sayles Inflation |
| Valic Company vs. Ab Bond Inflation | Valic Company vs. Simt Multi Asset Inflation | Valic Company vs. Goldman Sachs Inflation | Valic Company vs. Blackrock Inflation Protected |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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