Correlation Between Financials Ultrasector and Voya Floating

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

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

Diversification Opportunities for Financials Ultrasector and Voya Floating

0.26

Correlation Coefficient

Financials Ultrasector  Voya Floating

Modest diversification

The 3 months correlation between Financials and Voya is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Voya Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Floating Rate and Financials Ultrasector 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 Financials Ultrasector Profund are associated (or correlated) with Voya Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Floating Rate has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Voya Floating go up and down completely randomly.

Pair Corralation between Financials Ultrasector and Voya Floating

Assuming the 90 days horizon Financials Ultrasector Profund is expected to generate 6.35 times more return on investment than Voya Floating. However, Financials Ultrasector is 6.35 times more volatile than Voya Floating Rate. It trades about 0.07 of its potential returns per unit of risk. Voya Floating Rate is currently generating about 0.17 per unit of risk. If you would invest  2,335  in Financials Ultrasector Profund on October 22, 2024 and sell it today you would earn a total of  1,193  from holding Financials Ultrasector Profund or generate 51.09% return on investment over 90 days.

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

Financials Ultrasector Profund  vs.  Voya Floating Rate

Financials Ultrasector

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Financials Ultrasector may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Voya Floating Rate

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Floating Rate are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Voya Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financials Ultrasector and Voya Floating

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

The idea behind Financials Ultrasector Profund and Voya Floating Rate 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.