Correlation Between Voya High and American Funds
Can any of the company-specific risk be diversified away by investing in both Voya High 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 High 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 High Yield and American Funds Growth, you can compare the effects of market volatilities on Voya High 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 High with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Voya High and American Funds.
Diversification Opportunities for Voya High and American Funds
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Voya and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Voya High Yield and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and Voya High 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 High Yield 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 Growth has no effect on the direction of Voya High i.e., Voya High and American Funds go up and down completely randomly.
Pair Corralation between Voya High and American Funds
Assuming the 90 days horizon Voya High is expected to generate 2.59 times less return on investment than American Funds. But when comparing it to its historical volatility, Voya High Yield is 3.93 times less risky than American Funds. It trades about 0.19 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,112 in American Funds Growth on September 15, 2024 and sell it today you would earn a total of 676.00 from holding American Funds Growth or generate 32.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Voya High Yield vs. American Funds Growth
Performance |
| Timeline |
| Voya High Yield |
| American Funds Growth |
Voya High and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Voya High and American Funds
The main advantage of trading using opposite Voya High and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voya High 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.| Voya High vs. Voya Bond Index | Voya High vs. Voya Bond Index | Voya High vs. Voya Limited Maturity | Voya High vs. Voya Limited Maturity |
| American Funds vs. Pax High Yield | American Funds vs. Voya High Yield | American Funds vs. Artisan High Income | American Funds vs. Guggenheim High Yield |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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