Correlation Between Europacific Growth and Baron International
Can any of the company-specific risk be diversified away by investing in both Europacific Growth and Baron International 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 Baron International 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 Baron International Growth, you can compare the effects of market volatilities on Europacific Growth and Baron International 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 Baron International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and Baron International.
Diversification Opportunities for Europacific Growth and Baron International
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EUROPACIFIC and Baron is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and Baron International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron International 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 Baron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron International has no effect on the direction of Europacific Growth i.e., Europacific Growth and Baron International go up and down completely randomly.
Pair Corralation between Europacific Growth and Baron International
Assuming the 90 days horizon Europacific Growth Fund is expected to generate 0.98 times more return on investment than Baron International. However, Europacific Growth Fund is 1.02 times less risky than Baron International. It trades about -0.11 of its potential returns per unit of risk. Baron International Growth is currently generating about -0.13 per unit of risk. If you would invest 5,877 in Europacific Growth Fund on August 29, 2024 and sell it today you would lose (106.00) from holding Europacific Growth Fund or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Europacific Growth Fund vs. Baron International Growth
Performance |
| Timeline |
| Europacific Growth |
| Baron International |
Europacific Growth and Baron International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europacific Growth and Baron International
The main advantage of trading using opposite Europacific Growth and Baron International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth position performs unexpectedly, Baron International 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 Baron International will offset losses from the drop in Baron International's long position.The idea behind Europacific Growth Fund and Baron International Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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