Correlation Between Voya Solution and American Beacon

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

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

Diversification Opportunities for Voya Solution and American Beacon

0.18

Correlation Coefficient

Voya Solution  American Beacon

Average diversification

The 3 months correlation between Voya and American is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Voya Solution Conservative and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Voya Solution 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 Solution Conservative are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Bridgeway has no effect on the direction of Voya Solution i.e., Voya Solution and American Beacon go up and down completely randomly.

Pair Corralation between Voya Solution and American Beacon

Assuming the 90 days horizon Voya Solution Conservative is expected to generate 0.22 times more return on investment than American Beacon. However, Voya Solution Conservative is 4.61 times less risky than American Beacon. It trades about 0.08 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about -0.1 per unit of risk. If you would invest  1,027  in Voya Solution Conservative on December 21, 2024 and sell it today you would earn a total of  12.00  from holding Voya Solution Conservative or generate 1.17% return on investment over 90 days.

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

Voya Solution Conservative  vs.  American Beacon Bridgeway

Voya Solution Conser

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Solution Conservative are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Voya Solution is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Bridgeway

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Beacon Bridgeway has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Voya Solution and American Beacon

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

The idea behind Voya Solution Conservative and American Beacon Bridgeway 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.