Correlation Between Voya High and Voya Midcap
Can any of the company-specific risk be diversified away by investing in both Voya High 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 Voya High and Voya Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Voya High Yield and Voya Midcap Opportunities, you can compare the effects of market volatilities on Voya High 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 Voya High with a short position of Voya Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya High and Voya Midcap.
Diversification Opportunities for Voya High and Voya Midcap
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Voya and VOYA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Voya High Yield 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 Voya High 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 Voya High Yield 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 Voya High i.e., Voya High and Voya Midcap go up and down completely randomly.
Pair Corralation between Voya High and Voya Midcap
Assuming the 90 days horizon Voya High is expected to generate 10.98 times less return on investment than Voya Midcap. But when comparing it to its historical volatility, Voya High Yield is 8.36 times less risky than Voya Midcap. It trades about 0.26 of its potential returns per unit of risk. Voya Midcap Opportunities is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,571 in Voya Midcap Opportunities on August 30, 2024 and sell it today you would earn a total of 267.00 from holding Voya Midcap Opportunities or generate 10.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Voya High Yield vs. Voya Midcap Opportunities
Performance |
| Timeline |
| Voya High Yield |
| Voya Midcap Opportunities |
Voya High and Voya Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Voya High and Voya Midcap
The main advantage of trading using opposite Voya High and Voya Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voya High 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.| Voya High vs. Voya Bond Index | Voya High vs. Voya Bond Index | Voya High vs. Voya Limited Maturity | Voya High vs. Voya Limited Maturity |
| Voya Midcap vs. Voya Bond Index | Voya Midcap vs. Voya Bond Index | Voya Midcap vs. Voya Limited Maturity | Voya Midcap vs. Voya Limited Maturity |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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