Correlation Between Tax Free and Voya Large

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

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

Diversification Opportunities for Tax Free and Voya Large

0.8

Correlation Coefficient

Tax Free  Voya Large

Very poor diversification

The 3 months correlation between Tax and Voya is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tax Free Conservative Income and Voya Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Large Cap and Tax Free 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 Tax Free Conservative Income are associated (or correlated) with Voya Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Large Cap has no effect on the direction of Tax Free i.e., Tax Free and Voya Large go up and down completely randomly.

Pair Corralation between Tax Free and Voya Large

Assuming the 90 days horizon Tax Free Conservative Income is expected to generate 0.04 times more return on investment than Voya Large. However, Tax Free Conservative Income is 27.33 times less risky than Voya Large. It trades about 0.24 of its potential returns per unit of risk. Voya Large Cap is currently generating about -0.02 per unit of risk. If you would invest  998.00  in Tax Free Conservative Income on October 23, 2024 and sell it today you would earn a total of  2.00  from holding Tax Free Conservative Income or generate 0.2% return on investment over 90 days.

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

Tax Free Conservative Income  vs.  Voya Large Cap

Tax Free Conservative

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Free Conservative Income are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax Free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Large Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Voya Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tax Free and Voya Large

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

The idea behind Tax Free Conservative Income and Voya Large Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.