Correlation Between Voya Large and Voya Emerging

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

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

Diversification Opportunities for Voya Large and Voya Emerging

-0.56

Correlation Coefficient

Voya Large  Voya Emerging

Excellent diversification

The 3 months correlation between Voya and Voya is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Voya Large Cap and Voya Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Emerging Markets and Voya Large 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 Large Cap are associated (or correlated) with Voya Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Emerging Markets has no effect on the direction of Voya Large i.e., Voya Large and Voya Emerging go up and down completely randomly.

Pair Corralation between Voya Large and Voya Emerging

Assuming the 90 days horizon Voya Large Cap is expected to under-perform the Voya Emerging. In addition to that, Voya Large is 1.06 times more volatile than Voya Emerging Markets. It trades about -0.41 of its total potential returns per unit of risk. Voya Emerging Markets is currently generating about -0.03 per unit of volatility. If you would invest  1,011  in Voya Emerging Markets on September 25, 2024 and sell it today you would lose (4.00) from holding Voya Emerging Markets or give up 0.4% of portfolio value over 90 days.

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

Voya Large Cap  vs.  Voya Emerging Markets

Voya Large Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Large Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Voya Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Voya Emerging 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 Large and Voya Emerging

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

The idea behind Voya Large Cap and Voya Emerging 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.