Correlation Between Davis Government and Valic Company

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

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

Diversification Opportunities for Davis Government and Valic Company

-0.03

Correlation Coefficient

Davis Government  Valic Company

Good diversification

The 3 months correlation between Davis and Valic is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Davis Government Bond 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 Davis Government 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 Davis Government Bond 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 Davis Government i.e., Davis Government and Valic Company go up and down completely randomly.

Pair Corralation between Davis Government and Valic Company

Assuming the 90 days horizon Davis Government is expected to generate 9.48 times less return on investment than Valic Company. But when comparing it to its historical volatility, Davis Government Bond is 7.13 times less risky than Valic Company. It trades about 0.14 of its potential returns per unit of risk. Valic Company I is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,266  in Valic Company I on October 20, 2024 and sell it today you would earn a total of  47.00  from holding Valic Company I or generate 3.71% return on investment over 90 days.

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

Davis Government Bond  vs.  Valic Company I

Davis Government Bond

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Government Bond are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis Government 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Valic Company is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davis Government and Valic Company

The main advantage of trading using opposite Davis Government and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Government 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 Davis Government Bond 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.