Correlation Between Broad Cap and Valic Company
Can any of the company-specific risk be diversified away by investing in both Broad 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 Broad 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 Broad Cap Value and Valic Company I, you can compare the effects of market volatilities on Broad 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 Broad Cap with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broad Cap and Valic Company.
Diversification Opportunities for Broad Cap and Valic Company
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Broad and Valic is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Broad Cap Value 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 Broad 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 Broad Cap Value 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 Broad Cap i.e., Broad Cap and Valic Company go up and down completely randomly.
Pair Corralation between Broad Cap and Valic Company
Assuming the 90 days horizon Broad Cap Value is expected to generate 1.2 times more return on investment than Valic Company. However, Broad Cap is 1.2 times more volatile than Valic Company I. It trades about 0.24 of its potential returns per unit of risk. Valic Company I is currently generating about -0.23 per unit of risk. If you would invest 1,535 in Broad Cap Value on August 27, 2024 and sell it today you would earn a total of 68.00 from holding Broad Cap Value or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Broad Cap Value vs. Valic Company I
Performance |
| Timeline |
| Broad Cap Value |
| Valic Company I |
Broad Cap and Valic Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broad Cap and Valic Company
The main advantage of trading using opposite Broad Cap and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broad 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.| Broad Cap vs. Mid Cap Index | Broad Cap vs. Mid Cap Strategic | Broad Cap vs. Valic Company I | Broad Cap vs. Valic Company I |
| Valic Company vs. Mid Cap Index | Valic Company vs. Mid Cap Strategic | Valic Company vs. Valic Company I | Valic Company vs. Valic Company I |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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