Correlation Between Valic Company and Small Cap
Can any of the company-specific risk be diversified away by investing in both Valic Company and Small Cap 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 Valic Company and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valic Company I and Small Cap Index, you can compare the effects of market volatilities on Valic Company and Small Cap 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 Valic Company with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valic Company and Small Cap.
Diversification Opportunities for Valic Company and Small Cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Valic and Small is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Index and Valic Company 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 Valic Company I are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Index has no effect on the direction of Valic Company i.e., Valic Company and Small Cap go up and down completely randomly.
Pair Corralation between Valic Company and Small Cap
Assuming the 90 days horizon Valic Company is expected to generate 1.15 times less return on investment than Small Cap. But when comparing it to its historical volatility, Valic Company I is 1.99 times less risky than Small Cap. It trades about 0.09 of its potential returns per unit of risk. Small Cap Index is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,308 in Small Cap Index on August 27, 2024 and sell it today you would earn a total of 462.00 from holding Small Cap Index or generate 35.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valic Company I vs. Small Cap Index
Performance |
| Timeline |
| Valic Company I |
| Small Cap Index |
Valic Company and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valic Company and Small Cap
The main advantage of trading using opposite Valic Company and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valic Company position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Valic Company vs. Mid Cap Index | Valic Company vs. Mid Cap Strategic | Valic Company vs. Valic Company I | Valic Company vs. Valic Company I |
| Small Cap vs. Lifestyle Ii Moderate | Small Cap vs. American Funds Retirement | Small Cap vs. Pro Blend Moderate Term | Small Cap vs. Jp Morgan Smartretirement |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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