Correlation Between Europacific Growth and New Economy
Can any of the company-specific risk be diversified away by investing in both Europacific Growth and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Europacific Growth and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and New Economy.
Diversification Opportunities for Europacific Growth and New Economy
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Europacific and New is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Europacific Growth i.e., Europacific Growth and New Economy go up and down completely randomly.
Pair Corralation between Europacific Growth and New Economy
Assuming the 90 days horizon Europacific Growth Fund is expected to under-perform the New Economy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Europacific Growth Fund is 1.16 times less risky than New Economy. The mutual fund trades about -0.02 of its potential returns per unit of risk. The New Economy Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,984 in New Economy Fund on August 30, 2024 and sell it today you would earn a total of 764.00 from holding New Economy Fund or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Europacific Growth Fund vs. New Economy Fund
Performance |
| Timeline |
| Europacific Growth |
| New Economy Fund |
Europacific Growth and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europacific Growth and New Economy
The main advantage of trading using opposite Europacific Growth and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Europacific Growth vs. Growth Fund Of | Europacific Growth vs. Vanguard Institutional Index | Europacific Growth vs. Vanguard Mid Cap Index | Europacific Growth vs. Washington Mutual Investors |
| New Economy vs. Income Fund Of | New Economy vs. New World Fund | New Economy vs. American Mutual Fund | New Economy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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