Correlation Between Small Cap and Europacific Growth
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Europacific Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Europacific Growth Fund, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Europacific Growth.
Diversification Opportunities for Small Cap and Europacific Growth
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Europacific is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth and Small Cap 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Europacific Growth go up and down completely randomly.
Pair Corralation between Small Cap and Europacific Growth
Assuming the 90 days horizon Small Cap is expected to generate 3.72 times less return on investment than Europacific Growth. In addition to that, Small Cap is 1.73 times more volatile than Europacific Growth Fund. It trades about 0.04 of its total potential returns per unit of risk. Europacific Growth Fund is currently generating about 0.25 per unit of volatility. If you would invest 5,402 in Europacific Growth Fund on September 14, 2024 and sell it today you would earn a total of 151.00 from holding Europacific Growth Fund or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Europacific Growth Fund
Performance |
| Timeline |
| Small Cap Stock |
| Europacific Growth |
Small Cap and Europacific Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Europacific Growth
The main advantage of trading using opposite Small Cap and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Guggenheim Managed Futures | Small Cap vs. Simt Multi Asset Inflation | Small Cap vs. Goldman Sachs Inflation | Small Cap vs. Loomis Sayles Inflation |
| Europacific Growth vs. Artisan High Income | Europacific Growth vs. Franklin High Yield | Europacific Growth vs. Blrc Sgy Mnp | Europacific Growth vs. The National Tax Free |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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