Correlation Between Vanguard 500 and Voya Prime
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Voya Prime 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 500 and Voya Prime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Voya Prime Rate, you can compare the effects of market volatilities on Vanguard 500 and Voya Prime 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 500 with a short position of Voya Prime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Voya Prime.
Diversification Opportunities for Vanguard 500 and Voya Prime
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Voya is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Voya Prime Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Prime Rate and Vanguard 500 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 500 Index are associated (or correlated) with Voya Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Prime Rate has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Voya Prime go up and down completely randomly.
Pair Corralation between Vanguard 500 and Voya Prime
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.27 times more return on investment than Voya Prime. However, Vanguard 500 is 1.27 times more volatile than Voya Prime Rate. It trades about 0.13 of its potential returns per unit of risk. Voya Prime Rate is currently generating about 0.15 per unit of risk. If you would invest 48,568 in Vanguard 500 Index on September 1, 2024 and sell it today you would earn a total of 7,211 from holding Vanguard 500 Index or generate 14.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Voya Prime Rate
Performance |
| Timeline |
| Vanguard 500 Index |
| Voya Prime Rate |
Vanguard 500 and Voya Prime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Voya Prime
The main advantage of trading using opposite Vanguard 500 and Voya Prime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Voya Prime 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 Prime will offset losses from the drop in Voya Prime's long position.| Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Extended Market |
| Voya Prime vs. Vanguard Total Stock | Voya Prime vs. Vanguard 500 Index | Voya Prime vs. Vanguard Total Stock | Voya Prime vs. Vanguard Total Stock |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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