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 Retirement and Voya Retirement Moderate, 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

0.79

Correlation Coefficient

American Funds  Voya Retirement

Poor diversification

The 3 months correlation between American and Voya is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Voya Retirement Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Retirement Moderate 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 Retirement 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 Moderate 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 is expected to generate 17.13 times less return on investment than Voya Retirement. But when comparing it to its historical volatility, American Funds Retirement is 1.24 times less risky than Voya Retirement. It trades about 0.0 of its potential returns per unit of risk. Voya Retirement Moderate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,072  in Voya Retirement Moderate on October 24, 2024 and sell it today you would earn a total of  11.00  from holding Voya Retirement Moderate or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.78%
Values	Daily Returns

American Funds Retirement  vs.  Voya Retirement Moderate

American Funds Retirement

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

Voya Retirement Moderate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Retirement Moderate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary 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 Retirement and Voya Retirement Moderate 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.