Correlation Between Voya Global and Small Cap

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

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

Diversification Opportunities for Voya Global and Small Cap

0.65

Correlation Coefficient

Voya Global  Small Cap

Poor diversification

The 3 months correlation between Voya and Small is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Voya Global Advantage and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Voya Global 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 Global Advantage are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Voya Global i.e., Voya Global and Small Cap go up and down completely randomly.

Pair Corralation between Voya Global and Small Cap

Considering the 90-day investment horizon Voya Global Advantage is expected to generate 1.99 times more return on investment than Small Cap. However, Voya Global is 1.99 times more volatile than Small Cap Premium. It trades about 0.1 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.15 per unit of risk. If you would invest  864.00  in Voya Global Advantage on February 9, 2024 and sell it today you would earn a total of  21.00  from holding Voya Global Advantage or generate 2.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Voya Global Advantage  vs.  Small Cap Premium

Voya Global Advantage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Global Advantage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Voya Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Small Cap Premium

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Voya Global and Small Cap

The main advantage of trading using opposite Voya Global and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voya Global position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.

The idea behind Voya Global Advantage and Small Cap Premium 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..