Correlation Between Europacific Growth and International Growth
Can any of the company-specific risk be diversified away by investing in both Europacific Growth and International Growth 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 International Growth 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 International Growth Fund, you can compare the effects of market volatilities on Europacific Growth and International Growth 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 International Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and International Growth.
Diversification Opportunities for Europacific Growth and International Growth
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Europacific and International is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and International Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth 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 International Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth has no effect on the direction of Europacific Growth i.e., Europacific Growth and International Growth go up and down completely randomly.
Pair Corralation between Europacific Growth and International Growth
Assuming the 90 days horizon Europacific Growth Fund is expected to under-perform the International Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Europacific Growth Fund is 1.1 times less risky than International Growth. The mutual fund trades about -0.01 of its potential returns per unit of risk. The International Growth Fund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,266 in International Growth Fund on September 1, 2024 and sell it today you would earn a total of 2.00 from holding International Growth Fund or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Europacific Growth Fund vs. International Growth Fund
Performance |
| Timeline |
| Europacific Growth |
| International Growth |
Europacific Growth and International Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europacific Growth and International Growth
The main advantage of trading using opposite Europacific Growth and International Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth position performs unexpectedly, International Growth 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 International Growth will offset losses from the drop in International Growth's long position.| Europacific Growth vs. Vanguard Institutional Index | Europacific Growth vs. Vanguard Mid Cap Index | Europacific Growth vs. Washington Mutual Investors | Europacific Growth vs. Vanguard Small Cap Index |
| International Growth vs. Legg Mason Bw | International Growth vs. Tax Managed Large Cap | International Growth vs. John Hancock Investment | International Growth vs. Fundamental Large Cap |
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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