Correlation Between Vanguard Financials and Voya Large

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

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

Diversification Opportunities for Vanguard Financials and Voya Large

0.79

Correlation Coefficient

Vanguard Financials  Voya Large

Poor diversification

The 3 months correlation between Vanguard and Voya is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index 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 Vanguard Financials 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 Vanguard Financials Index 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 Vanguard Financials i.e., Vanguard Financials and Voya Large go up and down completely randomly.

Pair Corralation between Vanguard Financials and Voya Large

Assuming the 90 days horizon Vanguard Financials Index is expected to under-perform the Voya Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Financials Index is 1.17 times less risky than Voya Large. The mutual fund trades about -0.25 of its potential returns per unit of risk. The Voya Large Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,678  in Voya Large Cap on September 29, 2024 and sell it today you would earn a total of  52.00  from holding Voya Large Cap or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Vanguard Financials Index  vs.  Voya Large Cap

Vanguard Financials Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Voya Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Large Cap are ranked lower than 11 (%) 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 January 2025.

Pair Trading with Vanguard Financials and Voya Large

The main advantage of trading using opposite Vanguard Financials and Voya Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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 Vanguard Financials Index 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.