Correlation Between American Funds and Voya Target
Can any of the company-specific risk be diversified away by investing in both American Funds and Voya Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2025 and Voya Target Retirement, you can compare the effects of market volatilities on American Funds and Voya Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Voya Target.
Diversification Opportunities for American Funds and Voya Target
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Voya is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2025 and Voya Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Target Retirement 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 2025 are associated (or correlated) with Voya Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Target Retirement has no effect on the direction of American Funds i.e., American Funds and Voya Target go up and down completely randomly.
Pair Corralation between American Funds and Voya Target
Assuming the 90 days horizon American Funds is expected to generate 1.03 times less return on investment than Voya Target. But when comparing it to its historical volatility, American Funds 2025 is 1.12 times less risky than Voya Target. It trades about 0.16 of its potential returns per unit of risk. Voya Target Retirement is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,055 in Voya Target Retirement on September 4, 2024 and sell it today you would earn a total of 221.00 from holding Voya Target Retirement or generate 20.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.66% |
| Values | Daily Returns |
American Funds 2025 vs. Voya Target Retirement
Performance |
| Timeline |
| American Funds 2025 |
| Voya Target Retirement |
American Funds and Voya Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Voya Target
The main advantage of trading using opposite American Funds and Voya Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Voya Target 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 Target will offset losses from the drop in Voya Target's long position.The idea behind American Funds 2025 and Voya Target Retirement 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.
| Voya Target vs. Voya Bond Index | Voya Target vs. Voya Bond Index | Voya Target vs. Voya Limited Maturity | Voya Target vs. Voya Limited Maturity |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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