Correlation Between Voya Global and FlexShares Developed

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

By analyzing existing cross correlation between Voya Global Advantage and FlexShares Developed Markets, you can compare the effects of market volatilities on Voya Global and FlexShares Developed 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 Global with a short position of FlexShares Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya Global and FlexShares Developed.

Diversification Opportunities for Voya Global and FlexShares Developed

0.9

Correlation Coefficient

Voya Global  FlexShares Developed

Almost no diversification

The 3 months correlation between Voya and FlexShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Voya Global Advantage and FlexShares Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Developed and Voya Global 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 Global Advantage are associated (or correlated) with FlexShares Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Developed has no effect on the direction of Voya Global i.e., Voya Global and FlexShares Developed go up and down completely randomly.

Pair Corralation between Voya Global and FlexShares Developed

Considering the 90-day investment horizon Voya Global is expected to generate 1.6 times less return on investment than FlexShares Developed. In addition to that, Voya Global is 1.23 times more volatile than FlexShares Developed Markets. It trades about 0.06 of its total potential returns per unit of risk. FlexShares Developed Markets is currently generating about 0.12 per unit of volatility. If you would invest  2,741  in FlexShares Developed Markets on November 28, 2024 and sell it today you would earn a total of  102.00  from holding FlexShares Developed Markets or generate 3.72% return on investment over 90 days.

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

Voya Global Advantage  vs.  FlexShares Developed Markets

Voya Global Advantage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Global Advantage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Voya Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FlexShares Developed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Developed Markets are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FlexShares Developed is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Voya Global and FlexShares Developed

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

The idea behind Voya Global Advantage and FlexShares Developed Markets 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.