Correlation Between Valic Company and Growth Fund

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

Diversification Opportunities for Valic Company and Growth Fund

0.74

Correlation Coefficient

Valic Company  Growth Fund

Poor diversification

The 3 months correlation between Valic and Growth is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of Valic Company i.e., Valic Company and Growth Fund go up and down completely randomly.

Pair Corralation between Valic Company and Growth Fund

Assuming the 90 days horizon Valic Company is expected to generate 1.67 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Valic Company I is 8.03 times less risky than Growth Fund. It trades about 0.29 of its potential returns per unit of risk. Growth Fund Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,616  in Growth Fund Growth on September 12, 2024 and sell it today you would earn a total of  151.00  from holding Growth Fund Growth or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Valic Company I  vs.  Growth Fund Growth

Valic Company I

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Valic Company is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Growth Fund Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Valic Company and Growth Fund

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

The idea behind Valic Company I and Growth Fund Growth 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.