Correlation Between Federated Institutional and Voya Large
Can any of the company-specific risk be diversified away by investing in both Federated Institutional 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 Federated Institutional and Voya Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Institutional High and Voya Large Cap, you can compare the effects of market volatilities on Federated Institutional 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 Federated Institutional with a short position of Voya Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Voya Large.
Diversification Opportunities for Federated Institutional and Voya Large
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FEDERATED and Voya is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High 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 Federated Institutional 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 Federated Institutional High 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 Federated Institutional i.e., Federated Institutional and Voya Large go up and down completely randomly.
Pair Corralation between Federated Institutional and Voya Large
Assuming the 90 days horizon Federated Institutional is expected to generate 19.61 times less return on investment than Voya Large. But when comparing it to its historical volatility, Federated Institutional High is 5.76 times less risky than Voya Large. It trades about 0.12 of its potential returns per unit of risk. Voya Large Cap is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 604.00 in Voya Large Cap on September 1, 2024 and sell it today you would earn a total of 43.00 from holding Voya Large Cap or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Institutional High vs. Voya Large Cap
Performance |
| Timeline |
| Federated Institutional |
| Voya Large Cap |
Federated Institutional and Voya Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and Voya Large
The main advantage of trading using opposite Federated Institutional and Voya Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional 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 Federated Institutional High 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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