Correlation Between NYSE Composite and Voya Midcap

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

By analyzing existing cross correlation between NYSE Composite and Voya Midcap Opportunities, you can compare the effects of market volatilities on NYSE Composite and Voya Midcap 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 NYSE Composite with a short position of Voya Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Voya Midcap.

Diversification Opportunities for NYSE Composite and Voya Midcap

0.72

Correlation Coefficient

NYSE Composite  Voya Midcap

Poor diversification

The 3 months correlation between NYSE and Voya is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Voya Midcap Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Midcap Opportunities and NYSE Composite 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 NYSE Composite are associated (or correlated) with Voya Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Midcap Opportunities has no effect on the direction of NYSE Composite i.e., NYSE Composite and Voya Midcap go up and down completely randomly.

Pair Corralation between NYSE Composite and Voya Midcap

Assuming the 90 days trading horizon NYSE Composite is expected to generate 25.6 times less return on investment than Voya Midcap. But when comparing it to its historical volatility, NYSE Composite is 1.87 times less risky than Voya Midcap. It trades about 0.02 of its potential returns per unit of risk. Voya Midcap Opportunities is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  543.00  in Voya Midcap Opportunities on September 19, 2024 and sell it today you would earn a total of  78.00  from holding Voya Midcap Opportunities or generate 14.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

NYSE Composite  vs.  Voya Midcap Opportunities

Pair Trading with NYSE Composite and Voya Midcap

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

The idea behind NYSE Composite and Voya Midcap Opportunities 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.