Correlation Between Columbia Small and Valic Company

Can any of the company-specific risk be diversified away by investing in both Columbia Small 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 Columbia Small and Valic Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Columbia Small Cap and Valic Company I, you can compare the effects of market volatilities on Columbia Small 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 Columbia Small with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Small and Valic Company.

Diversification Opportunities for Columbia Small and Valic Company

0.67

Correlation Coefficient

Columbia Small  Valic Company

Poor diversification

The 3 months correlation between Columbia and Valic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap 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 Columbia Small 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 Columbia Small Cap 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 Columbia Small i.e., Columbia Small and Valic Company go up and down completely randomly.

Pair Corralation between Columbia Small and Valic Company

Assuming the 90 days horizon Columbia Small Cap is expected to generate 1.31 times more return on investment than Valic Company. However, Columbia Small is 1.31 times more volatile than Valic Company I. It trades about 0.12 of its potential returns per unit of risk. Valic Company I is currently generating about 0.11 per unit of risk. If you would invest  5,706  in Columbia Small Cap on September 12, 2024 and sell it today you would earn a total of  86.00  from holding Columbia Small Cap or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	54.55%
Values	Daily Returns

Columbia Small Cap  vs.  Valic Company I

Columbia Small Cap

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Columbia Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Small showed solid returns over the last few months and may actually be approaching a breakup point.

Valic Company I

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Valic Company may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Columbia Small and Valic Company

The main advantage of trading using opposite Columbia Small and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Small 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.

The idea behind Columbia Small Cap and Valic Company I pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.