Correlation Between Valic Company and Broad Cap

Can any of the company-specific risk be diversified away by investing in both Valic Company and Broad 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 Broad 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 Broad Cap Value, you can compare the effects of market volatilities on Valic Company and Broad 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 Broad Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valic Company and Broad Cap.

Diversification Opportunities for Valic Company and Broad Cap

-0.7

Correlation Coefficient

Valic Company  Broad Cap

Excellent diversification

The 3 months correlation between Valic and Broad is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Broad Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broad Cap Value 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 Broad Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broad Cap Value has no effect on the direction of Valic Company i.e., Valic Company and Broad Cap go up and down completely randomly.

Pair Corralation between Valic Company and Broad Cap

Assuming the 90 days horizon Valic Company I is expected to under-perform the Broad Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Valic Company I is 2.13 times less risky than Broad Cap. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Broad Cap Value is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,486  in Broad Cap Value on September 3, 2024 and sell it today you would earn a total of  119.00  from holding Broad Cap Value or generate 8.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Valic Company I  vs.  Broad Cap Value

Valic Company I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valic Company I has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Valic Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Broad Cap Value

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broad Cap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Broad Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Valic Company and Broad Cap

The main advantage of trading using opposite Valic Company and Broad Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valic Company position performs unexpectedly, Broad 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 Broad Cap will offset losses from the drop in Broad Cap's long position.

The idea behind Valic Company I and Broad Cap Value 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.