Correlation Between California Bond and Voya Midcap

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

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

Diversification Opportunities for California Bond and Voya Midcap

0.02

Correlation Coefficient

California Bond  Voya Midcap

Significant diversification

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

Pair Corralation between California Bond and Voya Midcap

Assuming the 90 days horizon California Bond is expected to generate 18.47 times less return on investment than Voya Midcap. But when comparing it to its historical volatility, California Bond Fund is 3.42 times less risky than Voya Midcap. It trades about 0.06 of its potential returns per unit of risk. Voya Midcap Opportunities is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,686  in Voya Midcap Opportunities on September 4, 2024 and sell it today you would earn a total of  364.00  from holding Voya Midcap Opportunities or generate 21.59% return on investment over 90 days.

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

California Bond Fund  vs.  Voya Midcap Opportunities

California Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Midcap Opportunities

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Midcap Opportunities are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Voya Midcap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with California Bond and Voya Midcap

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

The idea behind California Bond Fund and Voya Midcap Opportunities 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.