Correlation Between Davenport Value and Valic Company

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

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

Diversification Opportunities for Davenport Value and Valic Company

0.52

Correlation Coefficient

Davenport Value  Valic Company

Very weak diversification

The 3 months correlation between Davenport and Valic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Davenport Value Income 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 Davenport Value 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 Davenport Value Income 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 Davenport Value i.e., Davenport Value and Valic Company go up and down completely randomly.

Pair Corralation between Davenport Value and Valic Company

Assuming the 90 days horizon Davenport Value Income is expected to under-perform the Valic Company. But the mutual fund apears to be less risky and, when comparing its historical volatility, Davenport Value Income is 1.58 times less risky than Valic Company. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Valic Company I is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,270  in Valic Company I on September 13, 2024 and sell it today you would earn a total of  101.00  from holding Valic Company I or generate 7.95% return on investment over 90 days.

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

Davenport Value Income  vs.  Valic Company I

Davenport Value Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Valic Company I

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 8 (%) 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 Davenport Value and Valic Company

The main advantage of trading using opposite Davenport Value and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davenport Value 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 Davenport Value Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.