Correlation Between Europacific Growth and Mid Cap

Can any of the company-specific risk be diversified away by investing in both Europacific Growth and Mid Cap 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 Mid Cap 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 Mid Cap 15x Strategy, you can compare the effects of market volatilities on Europacific Growth and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and Mid Cap.

Diversification Opportunities for Europacific Growth and Mid Cap

-0.16

Correlation Coefficient

Europacific Growth  Mid Cap

Good diversification

The 3 months correlation between Europacific and Mid is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap 15x has no effect on the direction of Europacific Growth i.e., Europacific Growth and Mid Cap go up and down completely randomly.

Pair Corralation between Europacific Growth and Mid Cap

Assuming the 90 days horizon Europacific Growth Fund is expected to generate 0.84 times more return on investment than Mid Cap. However, Europacific Growth Fund is 1.19 times less risky than Mid Cap. It trades about -0.21 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about -0.35 per unit of risk. If you would invest  5,735  in Europacific Growth Fund on September 27, 2024 and sell it today you would lose (312.00) from holding Europacific Growth Fund or give up 5.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Europacific Growth Fund  vs.  Mid Cap 15x Strategy

Europacific Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europacific Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mid Cap 15x

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Mid Cap 15x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Europacific Growth and Mid Cap

The main advantage of trading using opposite Europacific Growth and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.

The idea behind Europacific Growth Fund and Mid Cap 15x Strategy 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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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.