Correlation Between Vanguard California and Voya Index
Can any of the company-specific risk be diversified away by investing in both Vanguard California and Voya Index 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 California and Voya Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard California Long Term and Voya Index Solution, you can compare the effects of market volatilities on Vanguard California and Voya Index 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 California with a short position of Voya Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and Voya Index.
Diversification Opportunities for Vanguard California and Voya Index
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Voya is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Long Term and Voya Index Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Index Solution and Vanguard California 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 California Long Term are associated (or correlated) with Voya Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Index Solution has no effect on the direction of Vanguard California i.e., Vanguard California and Voya Index go up and down completely randomly.
Pair Corralation between Vanguard California and Voya Index
Assuming the 90 days horizon Vanguard California is expected to generate 10.26 times less return on investment than Voya Index. But when comparing it to its historical volatility, Vanguard California Long Term is 2.04 times less risky than Voya Index. It trades about 0.03 of its potential returns per unit of risk. Voya Index Solution is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,790 in Voya Index Solution on September 12, 2024 and sell it today you would earn a total of 102.00 from holding Voya Index Solution or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Vanguard California Long Term vs. Voya Index Solution
Performance |
| Timeline |
| Vanguard California |
| Voya Index Solution |
Vanguard California and Voya Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard California and Voya Index
The main advantage of trading using opposite Vanguard California and Voya Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard California position performs unexpectedly, Voya Index 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 Index will offset losses from the drop in Voya Index's long position.The idea behind Vanguard California Long Term and Voya Index Solution 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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