Correlation Between Eafe Fund and World Energy
Can any of the company-specific risk be diversified away by investing in both Eafe Fund and World Energy 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 Eafe Fund and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Eafe Fund and World Energy Fund, you can compare the effects of market volatilities on Eafe Fund and World Energy 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 Eafe Fund with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eafe Fund and World Energy.
Diversification Opportunities for Eafe Fund and World Energy
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eafe and World is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Eafe Fund and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Eafe Fund 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 The Eafe Fund are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Eafe Fund i.e., Eafe Fund and World Energy go up and down completely randomly.
Pair Corralation between Eafe Fund and World Energy
Assuming the 90 days horizon Eafe Fund is expected to generate 2.53 times less return on investment than World Energy. But when comparing it to its historical volatility, The Eafe Fund is 1.05 times less risky than World Energy. It trades about 0.09 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,320 in World Energy Fund on September 3, 2024 and sell it today you would earn a total of 226.00 from holding World Energy Fund or generate 17.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Eafe Fund vs. World Energy Fund
Performance |
| Timeline |
| Eafe Fund |
| World Energy |
Eafe Fund and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eafe Fund and World Energy
The main advantage of trading using opposite Eafe Fund and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eafe Fund position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Eafe Fund vs. World Energy Fund | Eafe Fund vs. Icon Natural Resources | Eafe Fund vs. Hennessy Bp Energy | Eafe Fund vs. Jennison Natural Resources |
| World Energy vs. Fisher Small Cap | World Energy vs. Rbc Small Cap | World Energy vs. Us Small Cap | World Energy vs. Oklahoma College Savings |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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