Correlation Between Limited Term and Valic Company

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

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

Diversification Opportunities for Limited Term and Valic Company

-0.23

Correlation Coefficient

Limited Term  Valic Company

Very good diversification

The 3 months correlation between LIMITED and Valic is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Limited Term Tax 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 Limited Term 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 Limited Term Tax 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 Limited Term i.e., Limited Term and Valic Company go up and down completely randomly.

Pair Corralation between Limited Term and Valic Company

Assuming the 90 days horizon Limited Term Tax is expected to generate 0.06 times more return on investment than Valic Company. However, Limited Term Tax is 17.55 times less risky than Valic Company. It trades about 0.07 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  1,519  in Limited Term Tax on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Limited Term Tax or generate 0.59% return on investment over 90 days.

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

Limited Term Tax  vs.  Valic Company I

Limited Term Tax

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Limited Term Tax are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Limited Term 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

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 weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Limited Term and Valic Company

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

Check out your portfolio center.

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.