Correlation Between Valic Company and Pace Small/medium

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

Diversification Opportunities for Valic Company and Pace Small/medium

0.63

Correlation Coefficient

Valic Company  Pace Small/medium

Poor diversification

The 3 months correlation between Valic and Pace is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Pace Smallmedium Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Value 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 Pace Small/medium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Value has no effect on the direction of Valic Company i.e., Valic Company and Pace Small/medium go up and down completely randomly.

Pair Corralation between Valic Company and Pace Small/medium

Assuming the 90 days horizon Valic Company I is expected to generate 0.59 times more return on investment than Pace Small/medium. However, Valic Company I is 1.69 times less risky than Pace Small/medium. It trades about 0.03 of its potential returns per unit of risk. Pace Smallmedium Value is currently generating about -0.11 per unit of risk. If you would invest  1,268  in Valic Company I on October 8, 2024 and sell it today you would earn a total of  24.00  from holding Valic Company I or generate 1.89% return on investment over 90 days.

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

Valic Company I  vs.  Pace Smallmedium Value

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pace Smallmedium Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace Smallmedium Value 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Valic Company and Pace Small/medium

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

The idea behind Valic Company I and Pace Smallmedium Value 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.