Correlation Between State Street and Voya Financial

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

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

Diversification Opportunities for State Street and Voya Financial

0.83

Correlation Coefficient

State Street  Voya Financial

Very poor diversification

The 3 months correlation between State and Voya is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Voya Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Financial and State Street 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 State Street are associated (or correlated) with Voya Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Financial has no effect on the direction of State Street i.e., State Street and Voya Financial go up and down completely randomly.

Pair Corralation between State Street and Voya Financial

Assuming the 90 days trading horizon State Street is expected to generate 0.35 times more return on investment than Voya Financial. However, State Street is 2.86 times less risky than Voya Financial. It trades about -0.18 of its potential returns per unit of risk. Voya Financial is currently generating about -0.31 per unit of risk. If you would invest  2,448  in State Street on October 10, 2024 and sell it today you would lose (73.00) from holding State Street or give up 2.98% of portfolio value over 90 days.

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

State Street  vs.  Voya Financial

State Street

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Voya Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with State Street and Voya Financial

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

The idea behind State Street and Voya Financial 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.