Correlation Between Valic Company and Target Retirement

Can any of the company-specific risk be diversified away by investing in both Valic Company and Target Retirement 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 Target Retirement 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 Target Retirement 2040, you can compare the effects of market volatilities on Valic Company and Target Retirement 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 Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valic Company and Target Retirement.

Diversification Opportunities for Valic Company and Target Retirement

0.44

Correlation Coefficient

Valic Company  Target Retirement

Very weak diversification

The 3 months correlation between Valic and Target is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Target Retirement 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2040 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 Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2040 has no effect on the direction of Valic Company i.e., Valic Company and Target Retirement go up and down completely randomly.

Pair Corralation between Valic Company and Target Retirement

Assuming the 90 days horizon Valic Company I is expected to under-perform the Target Retirement. In addition to that, Valic Company is 2.19 times more volatile than Target Retirement 2040. It trades about -0.14 of its total potential returns per unit of risk. Target Retirement 2040 is currently generating about 0.05 per unit of volatility. If you would invest  1,299  in Target Retirement 2040 on December 20, 2024 and sell it today you would earn a total of  21.00  from holding Target Retirement 2040 or generate 1.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Valic Company I  vs.  Target Retirement 2040

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.

Target Retirement 2040

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Target Retirement 2040 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target Retirement 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 Target Retirement

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

The idea behind Valic Company I and Target Retirement 2040 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.