Correlation Between Voya Global and First Trust

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

By analyzing existing cross correlation between Voya Global Equity and First Trust Energy, you can compare the effects of market volatilities on Voya Global and First Trust 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 Voya Global with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya Global and First Trust.

Diversification Opportunities for Voya Global and First Trust

0.52

Correlation Coefficient

Voya Global  First Trust

Very weak diversification

The 3 months correlation between Voya and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Voya Global Equity and First Trust Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Energy and Voya Global 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 Voya Global Equity are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Energy has no effect on the direction of Voya Global i.e., Voya Global and First Trust go up and down completely randomly.

Pair Corralation between Voya Global and First Trust

Considering the 90-day investment horizon Voya Global is expected to generate 1.12 times less return on investment than First Trust. But when comparing it to its historical volatility, Voya Global Equity is 1.54 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,450  in First Trust Energy on September 3, 2024 and sell it today you would earn a total of  114.00  from holding First Trust Energy or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.91%
Values	Daily Returns

Voya Global Equity  vs.  First Trust Energy

Voya Global Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Global Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Voya Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Energy has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable forward indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Voya Global and First Trust

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

The idea behind Voya Global Equity and First Trust Energy 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 Stocks Directory module to find actively traded stocks across global markets.