Correlation Between Voya Index and Red Oak

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

By analyzing existing cross correlation between Voya Index Solution and Red Oak Technology, you can compare the effects of market volatilities on Voya Index and Red Oak 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 Index with a short position of Red Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya Index and Red Oak.

Diversification Opportunities for Voya Index and Red Oak

0.7

Correlation Coefficient

Voya Index  Red Oak

Poor diversification

The 3 months correlation between Voya and Red is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Voya Index Solution and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology and Voya Index 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 Index Solution are associated (or correlated) with Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of Voya Index i.e., Voya Index and Red Oak go up and down completely randomly.

Pair Corralation between Voya Index and Red Oak

Assuming the 90 days horizon Voya Index is expected to generate 1.89 times less return on investment than Red Oak. But when comparing it to its historical volatility, Voya Index Solution is 1.68 times less risky than Red Oak. It trades about 0.08 of its potential returns per unit of risk. Red Oak Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,838  in Red Oak Technology on October 4, 2024 and sell it today you would earn a total of  1,878  from holding Red Oak Technology or generate 66.17% return on investment over 90 days.

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

Voya Index Solution  vs.  Red Oak Technology

Voya Index Solution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Index Solution has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Voya Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Red Oak Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Oak Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Red Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Voya Index and Red Oak

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

The idea behind Voya Index Solution and Red Oak Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.