Correlation Between Small-cap Value and Voya Solution

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

By analyzing existing cross correlation between Small Cap Value Fund and Voya Solution Aggressive, you can compare the effects of market volatilities on Small-cap Value and Voya Solution 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 Small-cap Value with a short position of Voya Solution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Voya Solution.

Diversification Opportunities for Small-cap Value and Voya Solution

0.54

Correlation Coefficient

Small-cap Value  Voya Solution

Very weak diversification

The 3 months correlation between Small-cap and Voya is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Voya Solution Aggressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Solution Aggressive and Small-cap Value 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 Small Cap Value Fund are associated (or correlated) with Voya Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Solution Aggressive has no effect on the direction of Small-cap Value i.e., Small-cap Value and Voya Solution go up and down completely randomly.

Pair Corralation between Small-cap Value and Voya Solution

Assuming the 90 days horizon Small-cap Value is expected to generate 1.8 times less return on investment than Voya Solution. In addition to that, Small-cap Value is 1.99 times more volatile than Voya Solution Aggressive. It trades about 0.03 of its total potential returns per unit of risk. Voya Solution Aggressive is currently generating about 0.12 per unit of volatility. If you would invest  1,170  in Voya Solution Aggressive on October 5, 2024 and sell it today you would earn a total of  328.00  from holding Voya Solution Aggressive or generate 28.03% return on investment over 90 days.

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

Small Cap Value Fund  vs.  Voya Solution Aggressive

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Voya Solution Aggressive

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Solution Aggressive 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 Solution is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small-cap Value and Voya Solution

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

The idea behind Small Cap Value Fund and Voya Solution Aggressive 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.