Correlation Between Valic Company and Small Capitalization

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

Diversification Opportunities for Valic Company and Small Capitalization

0.76

Correlation Coefficient

Valic Company  Small Capitalization

Poor diversification

The 3 months correlation between Valic and Small is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization 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 Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Valic Company i.e., Valic Company and Small Capitalization go up and down completely randomly.

Pair Corralation between Valic Company and Small Capitalization

Assuming the 90 days horizon Valic Company is expected to generate 1.14 times less return on investment than Small Capitalization. In addition to that, Valic Company is 1.15 times more volatile than Small Capitalization Portfolio. It trades about 0.06 of its total potential returns per unit of risk. Small Capitalization Portfolio is currently generating about 0.08 per unit of volatility. If you would invest  561.00  in Small Capitalization Portfolio on May 15, 2025 and sell it today you would earn a total of  26.00  from holding Small Capitalization Portfolio or generate 4.63% 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.  Small Capitalization Portfolio

Valic Company I

Risk-Adjusted Performance

Mild

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.

Small Capitalization

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Small Capitalization Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Small Capitalization 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 Small Capitalization

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

The idea behind Valic Company I and Small Capitalization Portfolio 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.