Correlation Between Deutsche Capital and Valic Company

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

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

Diversification Opportunities for Deutsche Capital and Valic Company

0.76

Correlation Coefficient

Deutsche Capital  Valic Company

Poor diversification

The 3 months correlation between Deutsche and Valic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Capital Growth 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 Deutsche Capital 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 Deutsche Capital Growth 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 Deutsche Capital i.e., Deutsche Capital and Valic Company go up and down completely randomly.

Pair Corralation between Deutsche Capital and Valic Company

Assuming the 90 days horizon Deutsche Capital Growth is expected to generate 1.56 times more return on investment than Valic Company. However, Deutsche Capital is 1.56 times more volatile than Valic Company I. It trades about -0.12 of its potential returns per unit of risk. Valic Company I is currently generating about -0.21 per unit of risk. If you would invest  13,514  in Deutsche Capital Growth on October 11, 2024 and sell it today you would lose (1,113) from holding Deutsche Capital Growth or give up 8.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.56%
Values	Daily Returns

Deutsche Capital Growth  vs.  Valic Company I

Deutsche Capital Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Capital Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Deutsche Capital 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

0 of 100

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 fairly strong fundamental indicators, Valic Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Capital and Valic Company

The main advantage of trading using opposite Deutsche Capital and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Capital 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 Deutsche Capital Growth 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.