Correlation Between American Funds and Europacific Growth
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Europacific Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Income and Europacific Growth Fund, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Europacific Growth.
Diversification Opportunities for American Funds and Europacific Growth
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Europacific is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Income and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth and American Funds 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 American Funds Income 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 American Funds i.e., American Funds and Europacific Growth go up and down completely randomly.
Pair Corralation between American Funds and Europacific Growth
Assuming the 90 days horizon American Funds is expected to generate 18.3 times less return on investment than Europacific Growth. But when comparing it to its historical volatility, American Funds Income is 1.27 times less risky than Europacific Growth. It trades about 0.02 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 5,290 in Europacific Growth Fund on October 25, 2024 and sell it today you would earn a total of 171.00 from holding Europacific Growth Fund or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Income vs. Europacific Growth Fund
Performance |
| Timeline |
| American Funds Income |
| Europacific Growth |
American Funds and Europacific Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Europacific Growth
The main advantage of trading using opposite American Funds and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Baillie Gifford Health | American Funds vs. Highland Longshort Healthcare | American Funds vs. Alger Health Sciences | American Funds vs. Hartford Healthcare Hls |
| Europacific Growth vs. Barings High Yield | Europacific Growth vs. Multisector Bond Sma | Europacific Growth vs. Morningstar Defensive Bond | Europacific Growth vs. Ab Bond Inflation |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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