Correlation Between Voya High and Gold Bullion

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

By analyzing existing cross correlation between Voya High Yield and The Gold Bullion, you can compare the effects of market volatilities on Voya High and Gold Bullion 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 High with a short position of Gold Bullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya High and Gold Bullion.

Diversification Opportunities for Voya High and Gold Bullion

0.84

Correlation Coefficient

Voya High  Gold Bullion

Very poor diversification

The 3 months correlation between Voya and Gold is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Voya High Yield and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and Voya High 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 High Yield are associated (or correlated) with Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Voya High i.e., Voya High and Gold Bullion go up and down completely randomly.

Pair Corralation between Voya High and Gold Bullion

Assuming the 90 days horizon Voya High is expected to generate 14.62 times less return on investment than Gold Bullion. But when comparing it to its historical volatility, Voya High Yield is 4.37 times less risky than Gold Bullion. It trades about 0.09 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,963  in The Gold Bullion on December 18, 2024 and sell it today you would earn a total of  322.00  from holding The Gold Bullion or generate 16.4% return on investment over 90 days.

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

Voya High Yield  vs.  The Gold Bullion

Voya High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Voya High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Voya High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Gold Bullion showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Voya High and Gold Bullion

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

The idea behind Voya High Yield and The Gold Bullion 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.