Correlation Between Voya Index and Biotechnology Portfolio

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

By analyzing existing cross correlation between Voya Index Plus and Biotechnology Portfolio Biotechnology, you can compare the effects of market volatilities on Voya Index and Biotechnology Portfolio 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 Biotechnology Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya Index and Biotechnology Portfolio.

Diversification Opportunities for Voya Index and Biotechnology Portfolio

-0.02

Correlation Coefficient

Voya Index  Biotechnology Portfolio

Good diversification

The 3 months correlation between Voya and Biotechnology is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Voya Index Plus and Biotechnology Portfolio Biotec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Portfolio 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 Plus are associated (or correlated) with Biotechnology Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Portfolio has no effect on the direction of Voya Index i.e., Voya Index and Biotechnology Portfolio go up and down completely randomly.

Pair Corralation between Voya Index and Biotechnology Portfolio

Assuming the 90 days horizon Voya Index Plus is expected to generate 0.71 times more return on investment than Biotechnology Portfolio. However, Voya Index Plus is 1.4 times less risky than Biotechnology Portfolio. It trades about -0.21 of its potential returns per unit of risk. Biotechnology Portfolio Biotechnology is currently generating about -0.24 per unit of risk. If you would invest  2,251  in Voya Index Plus on October 8, 2024 and sell it today you would lose (97.00) from holding Voya Index Plus or give up 4.31% of portfolio value over 90 days.

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

Voya Index Plus  vs.  Biotechnology Portfolio Biotec

Voya Index Plus

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Index Plus 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 Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Biotechnology Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotechnology Portfolio Biotechnology has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Voya Index and Biotechnology Portfolio

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

The idea behind Voya Index Plus and Biotechnology Portfolio Biotechnology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.