Correlation Between American Funds and Voya Retirement

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

By analyzing existing cross correlation between American Funds Inflation and Voya Retirement Growth, you can compare the effects of market volatilities on American Funds and Voya Retirement 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 American Funds with a short position of Voya Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Voya Retirement.

Diversification Opportunities for American Funds and Voya Retirement

-0.11

Correlation Coefficient

American Funds  Voya Retirement

Good diversification

The 3 months correlation between American and Voya is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Voya Retirement Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Retirement Growth and American Funds 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 American Funds Inflation are associated (or correlated) with Voya Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Retirement Growth has no effect on the direction of American Funds i.e., American Funds and Voya Retirement go up and down completely randomly.

Pair Corralation between American Funds and Voya Retirement

Assuming the 90 days horizon American Funds Inflation is expected to under-perform the Voya Retirement. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Inflation is 1.31 times less risky than Voya Retirement. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Voya Retirement Growth is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,203  in Voya Retirement Growth on September 29, 2024 and sell it today you would earn a total of  7.00  from holding Voya Retirement Growth or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

American Funds Inflation  vs.  Voya Retirement Growth

American Funds Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Retirement Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Retirement Growth are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Voya Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Funds and Voya Retirement

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

The idea behind American Funds Inflation and Voya Retirement Growth 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.