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 Special 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
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Valic is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Special 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 Special 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 Special is expected to generate 2.76 times more return on investment than Valic Company. However, Small Cap is 2.76 times more volatile than Valic Company I. It trades about 0.11 of its potential returns per unit of risk. Valic Company I is currently generating about 0.04 per unit of risk. If you would invest 1,252 in Small Cap Special on October 20, 2024 and sell it today you would earn a total of 23.00 from holding Small Cap Special or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Small Cap Special vs. Valic Company I
Performance |
| Timeline |
| Small Cap Special |
| 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. Tfa Alphagen Growth | Small Cap vs. Morningstar Aggressive Growth | Small Cap vs. Transamerica Capital Growth | Small Cap vs. Upright Growth Income |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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