Correlation Between Voya High and Disciplined Growth

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

By analyzing existing cross correlation between Voya High Yield and Disciplined Growth Fund, you can compare the effects of market volatilities on Voya High and Disciplined Growth 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 High with a short position of Disciplined Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya High and Disciplined Growth.

Diversification Opportunities for Voya High and Disciplined Growth

0.68

Correlation Coefficient

Voya High  Disciplined Growth

Poor diversification

The 3 months correlation between Voya and Disciplined is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Voya High Yield and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Growth and Voya High 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 High Yield are associated (or correlated) with Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of Voya High i.e., Voya High and Disciplined Growth go up and down completely randomly.

Pair Corralation between Voya High and Disciplined Growth

Assuming the 90 days horizon Voya High is expected to generate 4.2 times less return on investment than Disciplined Growth. But when comparing it to its historical volatility, Voya High Yield is 3.65 times less risky than Disciplined Growth. It trades about 0.11 of its potential returns per unit of risk. Disciplined Growth Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,569  in Disciplined Growth Fund on September 12, 2024 and sell it today you would earn a total of  1,408  from holding Disciplined Growth Fund or generate 89.74% return on investment over 90 days.

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

Voya High Yield  vs.  Disciplined Growth Fund

Voya High Yield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Voya High Yield are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Voya High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Disciplined Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Disciplined Growth Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Disciplined Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Voya High and Disciplined Growth

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

The idea behind Voya High Yield and Disciplined Growth Fund 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.