Correlation Between Small Capitalization and Voya Solution

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

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

Diversification Opportunities for Small Capitalization and Voya Solution

0.41

Correlation Coefficient

Small Capitalization  Voya Solution

Very weak diversification

The 3 months correlation between Small and Voya is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Small Capitalization Portfolio and Voya Solution Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Solution Conser and Small Capitalization 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 Small Capitalization Portfolio are associated (or correlated) with Voya Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Solution Conser has no effect on the direction of Small Capitalization i.e., Small Capitalization and Voya Solution go up and down completely randomly.

Pair Corralation between Small Capitalization and Voya Solution

Assuming the 90 days horizon Small Capitalization Portfolio is expected to generate 4.08 times more return on investment than Voya Solution. However, Small Capitalization is 4.08 times more volatile than Voya Solution Conservative. It trades about 0.04 of its potential returns per unit of risk. Voya Solution Conservative is currently generating about 0.12 per unit of risk. If you would invest  602.00  in Small Capitalization Portfolio on October 26, 2024 and sell it today you would earn a total of  5.00  from holding Small Capitalization Portfolio or generate 0.83% return on investment over 90 days.

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

Small Capitalization Portfolio  vs.  Voya Solution Conservative

Small Capitalization

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Capitalization Portfolio 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.

Voya Solution Conser

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Solution Conservative are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Voya Solution is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Capitalization and Voya Solution

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

The idea behind Small Capitalization Portfolio and Voya Solution Conservative 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.