Correlation Between Capital World and Europacific Growth
Can any of the company-specific risk be diversified away by investing in both Capital World and Europacific 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 Capital World and Europacific Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Growth and Europacific Growth Fund, you can compare the effects of market volatilities on Capital World and Europacific 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 Capital World with a short position of Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Europacific Growth.
Diversification Opportunities for Capital World and Europacific Growth
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Europacific is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth and Capital World 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 Capital World Growth are associated (or correlated) with Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of Capital World i.e., Capital World and Europacific Growth go up and down completely randomly.
Pair Corralation between Capital World and Europacific Growth
Assuming the 90 days horizon Capital World Growth is expected to generate 0.93 times more return on investment than Europacific Growth. However, Capital World Growth is 1.07 times less risky than Europacific Growth. It trades about 0.0 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about -0.12 per unit of risk. If you would invest 6,858 in Capital World Growth on August 28, 2024 and sell it today you would lose (2.00) from holding Capital World Growth or give up 0.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Europacific Growth Fund
Performance |
| Timeline |
| Capital World Growth |
| Europacific Growth |
Capital World and Europacific Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Europacific Growth
The main advantage of trading using opposite Capital World and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Europacific 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 Europacific Growth will offset losses from the drop in Europacific Growth's long position.| Capital World vs. Ultramid Cap Profund Ultramid Cap | Capital World vs. Royce Opportunity Fund | Capital World vs. Fidelity Small Cap | Capital World vs. Columbia Small Cap |
| Europacific Growth vs. Income Fund Of | Europacific Growth vs. New World Fund | Europacific Growth vs. American Mutual Fund | Europacific Growth 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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