Correlation Between Applied Finance and Valic Company

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

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

Diversification Opportunities for Applied Finance and Valic Company

0.98

Correlation Coefficient

Applied Finance  Valic Company

Almost no diversification

The 3 months correlation between Applied and Valic is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer 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 Applied Finance 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 Applied Finance Explorer 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 Applied Finance i.e., Applied Finance and Valic Company go up and down completely randomly.

Pair Corralation between Applied Finance and Valic Company

Assuming the 90 days horizon Applied Finance Explorer is expected to under-perform the Valic Company. In addition to that, Applied Finance is 1.24 times more volatile than Valic Company I. It trades about -0.21 of its total potential returns per unit of risk. Valic Company I is currently generating about -0.14 per unit of volatility. If you would invest  1,933  in Valic Company I on September 12, 2024 and sell it today you would lose (39.00) from holding Valic Company I or give up 2.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Applied Finance Explorer  vs.  Valic Company I

Applied Finance Explorer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Explorer are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Applied Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valic Company I

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Valic Company may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Applied Finance and Valic Company

The main advantage of trading using opposite Applied Finance and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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 Applied Finance Explorer 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..