Correlation Between Voya Prime and Boston Trust

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

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

Diversification Opportunities for Voya Prime and Boston Trust

0.83

Correlation Coefficient

Voya Prime  Boston Trust

Very poor diversification

The 3 months correlation between Voya and Boston is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Voya Prime Rate and Boston Trust Smid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Smid and Voya Prime 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 Prime Rate are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Smid has no effect on the direction of Voya Prime i.e., Voya Prime and Boston Trust go up and down completely randomly.

Pair Corralation between Voya Prime and Boston Trust

Assuming the 90 days horizon Voya Prime Rate is expected to generate 0.68 times more return on investment than Boston Trust. However, Voya Prime Rate is 1.46 times less risky than Boston Trust. It trades about 0.31 of its potential returns per unit of risk. Boston Trust Smid is currently generating about 0.17 per unit of risk. If you would invest  713.00  in Voya Prime Rate on September 12, 2024 and sell it today you would earn a total of  80.00  from holding Voya Prime Rate or generate 11.22% return on investment over 90 days.

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

Voya Prime Rate  vs.  Boston Trust Smid

Voya Prime Rate

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Prime Rate are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Voya Prime may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boston Trust Smid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Smid are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Boston Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Voya Prime and Boston Trust

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

The idea behind Voya Prime Rate and Boston Trust Smid 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.