Correlation Between Europacific Growth and International Stock
Can any of the company-specific risk be diversified away by investing in both Europacific Growth and International Stock 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 Stock 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 Stock Fund, you can compare the effects of market volatilities on Europacific Growth and International Stock 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 Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and International Stock.
Diversification Opportunities for Europacific Growth and International Stock
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EUROPACIFIC and International is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and International Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Stock 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 Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Stock has no effect on the direction of Europacific Growth i.e., Europacific Growth and International Stock go up and down completely randomly.
Pair Corralation between Europacific Growth and International Stock
Assuming the 90 days horizon Europacific Growth Fund is expected to generate 0.79 times more return on investment than International Stock. However, Europacific Growth Fund is 1.26 times less risky than International Stock. It trades about -0.11 of its potential returns per unit of risk. International Stock Fund is currently generating about -0.2 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Europacific Growth Fund vs. International Stock Fund
Performance |
| Timeline |
| Europacific Growth |
| International Stock |
Europacific Growth and International Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europacific Growth and International Stock
The main advantage of trading using opposite Europacific Growth and International Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth position performs unexpectedly, International Stock 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 Stock will offset losses from the drop in International Stock's long position.The idea behind Europacific Growth Fund and International Stock Fund 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.
| International Stock vs. Europacific Growth Fund | International Stock vs. Europacific Growth Fund | International Stock vs. Europacific Growth Fund | International Stock vs. Europacific Growth 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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