Correlation Between Voya High and Voya Russelltm

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

Diversification Opportunities for Voya High and Voya Russelltm

0.67

Correlation Coefficient

Voya High  Voya Russelltm

Poor diversification

The 3 months correlation between Voya and Voya is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Voya High Yield and Voya Russelltm Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Russelltm Mid 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 Voya Russelltm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Russelltm Mid has no effect on the direction of Voya High i.e., Voya High and Voya Russelltm go up and down completely randomly.

Pair Corralation between Voya High and Voya Russelltm

Assuming the 90 days horizon Voya High is expected to generate 9.42 times less return on investment than Voya Russelltm. But when comparing it to its historical volatility, Voya High Yield is 4.64 times less risky than Voya Russelltm. It trades about 0.02 of its potential returns per unit of risk. Voya Russelltm Mid is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,136  in Voya Russelltm Mid on September 22, 2024 and sell it today you would earn a total of  24.00  from holding Voya Russelltm Mid or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Voya High Yield  vs.  Voya Russelltm Mid

Voya High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Voya High Yield are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Voya High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Russelltm Mid

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Russelltm Mid are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Voya Russelltm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Voya High and Voya Russelltm

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

The idea behind Voya High Yield and Voya Russelltm Mid 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.