Correlation Between Valic Company and Global Alpha

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

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

Diversification Opportunities for Valic Company and Global Alpha

0.26

Correlation Coefficient

Valic Company  Global Alpha

Modest diversification

The 3 months correlation between Valic and Global is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and The Global Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Alpha and Valic Company 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 Valic Company I are associated (or correlated) with Global Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Alpha has no effect on the direction of Valic Company i.e., Valic Company and Global Alpha go up and down completely randomly.

Pair Corralation between Valic Company and Global Alpha

Assuming the 90 days horizon Valic Company I is expected to generate 1.16 times more return on investment than Global Alpha. However, Valic Company is 1.16 times more volatile than The Global Alpha. It trades about 0.04 of its potential returns per unit of risk. The Global Alpha is currently generating about 0.04 per unit of risk. If you would invest  1,002  in Valic Company I on December 7, 2024 and sell it today you would earn a total of  221.00  from holding Valic Company I or generate 22.06% return on investment over 90 days.

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

Valic Company I  vs.  The Global Alpha

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 latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Global Alpha

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Global Alpha 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 forward-looking signals 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 Valic Company and Global Alpha

The main advantage of trading using opposite Valic Company and Global Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valic Company position performs unexpectedly, Global Alpha 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 Global Alpha will offset losses from the drop in Global Alpha's long position.

The idea behind Valic Company I and The Global Alpha 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.