Correlation Between Valic Company and Fidelity Small

Can any of the company-specific risk be diversified away by investing in both Valic Company and Fidelity Small 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 Fidelity Small 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 Fidelity Small Cap, you can compare the effects of market volatilities on Valic Company and Fidelity Small 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 Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valic Company and Fidelity Small.

Diversification Opportunities for Valic Company and Fidelity Small

1.0

Correlation Coefficient

Valic Company  Fidelity Small

No risk reduction

The 3 months correlation between Valic and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Fidelity Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Small Cap 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 Fidelity Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Small Cap has no effect on the direction of Valic Company i.e., Valic Company and Fidelity Small go up and down completely randomly.

Pair Corralation between Valic Company and Fidelity Small

Assuming the 90 days horizon Valic Company I is expected to generate about the same return on investment as Fidelity Small Cap. But, Valic Company I is 1.01 times less risky than Fidelity Small. It trades about 0.07 of its potential returns per unit of risk. Fidelity Small Cap is currently generating about 0.07 per unit of risk. If you would invest  2,602  in Fidelity Small Cap on September 18, 2024 and sell it today you would earn a total of  131.00  from holding Fidelity Small Cap or generate 5.03% return on investment over 90 days.

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

Valic Company I  vs.  Fidelity Small Cap

Valic Company I

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 5 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valic Company and Fidelity Small

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

The idea behind Valic Company I and Fidelity Small Cap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.