Correlation Between Voya Bond and Voya Retirement

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

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

Diversification Opportunities for Voya Bond and Voya Retirement

0.63

Correlation Coefficient

Voya Bond  Voya Retirement

Poor diversification

The 3 months correlation between Voya and Voya is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Voya Bond Index and Voya Retirement Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Retirement Servative and Voya Bond 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 Bond Index 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 Servative has no effect on the direction of Voya Bond i.e., Voya Bond and Voya Retirement go up and down completely randomly.

Pair Corralation between Voya Bond and Voya Retirement

Assuming the 90 days horizon Voya Bond Index is expected to under-perform the Voya Retirement. But the mutual fund apears to be less risky and, when comparing its historical volatility, Voya Bond Index is 1.12 times less risky than Voya Retirement. The mutual fund trades about -0.29 of its potential returns per unit of risk. The Voya Retirement Servative is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  814.00  in Voya Retirement Servative on September 26, 2024 and sell it today you would lose (8.00) from holding Voya Retirement Servative or give up 0.98% of portfolio value over 90 days.

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

Voya Bond Index  vs.  Voya Retirement Servative

Voya Bond Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Voya Retirement Servative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Retirement Servative has generated negative risk-adjusted returns adding no value to fund investors. 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 Voya Bond and Voya Retirement

The main advantage of trading using opposite Voya Bond and Voya Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voya Bond 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 Voya Bond Index and Voya Retirement Servative 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.