Correlation Between Europacific Growth and American Funds
Can any of the company-specific risk be diversified away by investing in both Europacific Growth 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 Europacific Growth and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europacific Growth Fund and American Funds Smallcap, you can compare the effects of market volatilities on Europacific Growth 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 Europacific Growth with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and American Funds.
Diversification Opportunities for Europacific Growth and American Funds
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Europacific and American is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and American Funds Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Smallcap and Europacific Growth 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 Europacific Growth Fund 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 Smallcap has no effect on the direction of Europacific Growth i.e., Europacific Growth and American Funds go up and down completely randomly.
Pair Corralation between Europacific Growth and American Funds
Assuming the 90 days horizon Europacific Growth is expected to generate 17.86 times less return on investment than American Funds. But when comparing it to its historical volatility, Europacific Growth Fund is 1.22 times less risky than American Funds. It trades about 0.02 of its potential returns per unit of risk. American Funds Smallcap is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6,915 in American Funds Smallcap on September 2, 2024 and sell it today you would earn a total of 299.00 from holding American Funds Smallcap or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Europacific Growth Fund vs. American Funds Smallcap
Performance |
| Timeline |
| Europacific Growth |
| American Funds Smallcap |
Europacific Growth and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europacific Growth and American Funds
The main advantage of trading using opposite Europacific Growth and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth 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.| Europacific Growth vs. Growth Fund Of | Europacific Growth vs. Washington Mutual Investors | Europacific Growth vs. American Funds Fundamental | Europacific Growth vs. New World Fund |
| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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