Correlation Between Vanguard Financials and Voya Retirement

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

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

Diversification Opportunities for Vanguard Financials and Voya Retirement

0.77

Correlation Coefficient

Vanguard Financials  Voya Retirement

Poor diversification

The 3 months correlation between Vanguard and Voya is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index 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 Vanguard Financials 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 Vanguard Financials 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 Growth has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Voya Retirement go up and down completely randomly.

Pair Corralation between Vanguard Financials and Voya Retirement

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 1.65 times more return on investment than Voya Retirement. However, Vanguard Financials is 1.65 times more volatile than Voya Retirement Growth. It trades about 0.08 of its potential returns per unit of risk. Voya Retirement Growth is currently generating about 0.1 per unit of risk. If you would invest  4,116  in Vanguard Financials Index on September 28, 2024 and sell it today you would earn a total of  1,853  from holding Vanguard Financials Index or generate 45.02% return on investment over 90 days.

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

Vanguard Financials Index  vs.  Voya Retirement Growth

Vanguard Financials Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Voya Retirement Growth

Risk-Adjusted Performance

1 of 100

Insignificant

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 Vanguard Financials and Voya Retirement

The main advantage of trading using opposite Vanguard Financials and Voya Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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 Vanguard Financials Index 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.