Correlation Between Government Securities and Valic Company
Can any of the company-specific risk be diversified away by investing in both Government Securities 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 Government Securities and Valic Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Securities Fund and Valic Company I, you can compare the effects of market volatilities on Government Securities 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 Government Securities with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Valic Company.
Diversification Opportunities for Government Securities and Valic Company
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Government and Valic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities 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 Government Securities 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 Government Securities 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 Government Securities i.e., Government Securities and Valic Company go up and down completely randomly.
Pair Corralation between Government Securities and Valic Company
Assuming the 90 days horizon Government Securities is expected to generate 7.28 times less return on investment than Valic Company. But when comparing it to its historical volatility, Government Securities Fund is 2.1 times less risky than Valic Company. It trades about 0.11 of its potential returns per unit of risk. Valic Company I is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,246 in Valic Company I on November 2, 2024 and sell it today you would earn a total of 60.00 from holding Valic Company I or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. Valic Company I
Performance |
| Timeline |
| Government Securities |
| Valic Company I |
Government Securities and Valic Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Valic Company
The main advantage of trading using opposite Government Securities and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities 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.| Government Securities vs. Mid Cap Index | Government Securities vs. Mid Cap Strategic | Government Securities vs. Valic Company I | Government Securities 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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