Correlation Between Voya Government and American Funds

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

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

Diversification Opportunities for Voya Government and American Funds

0.0

Correlation Coefficient

Voya Government  American Funds

Pay attention - limited upside

The 3 months correlation between Voya and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Voya Government Money and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New and Voya Government 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 Government Money are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds New has no effect on the direction of Voya Government i.e., Voya Government and American Funds go up and down completely randomly.

Pair Corralation between Voya Government and American Funds

Assuming the 90 days horizon Voya Government is expected to generate 2.99 times less return on investment than American Funds. But when comparing it to its historical volatility, Voya Government Money is 6.25 times less risky than American Funds. It trades about 0.13 of its potential returns per unit of risk. American Funds New is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,256  in American Funds New on October 24, 2024 and sell it today you would earn a total of  1,192  from holding American Funds New or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.76%
Values	Daily Returns

Voya Government Money  vs.  American Funds New

Voya Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Funds New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds New has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Funds 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 Government and American Funds

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

The idea behind Voya Government Money and American Funds New 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .