Correlation Between Europac Gold and State Street

Can any of the company-specific risk be diversified away by investing in both Europac Gold and State Street 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 Europac Gold and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Europac Gold Fund and State Street Smallmid, you can compare the effects of market volatilities on Europac Gold and State Street 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 Europac Gold with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europac Gold and State Street.

Diversification Opportunities for Europac Gold and State Street

-0.23

Correlation Coefficient

Europac Gold  State Street

Very good diversification

The 3 months correlation between Europac and State is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Europac Gold Fund and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid and Europac Gold 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 Europac Gold Fund are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of Europac Gold i.e., Europac Gold and State Street go up and down completely randomly.

Pair Corralation between Europac Gold and State Street

Assuming the 90 days horizon Europac Gold Fund is expected to generate 1.53 times more return on investment than State Street. However, Europac Gold is 1.53 times more volatile than State Street Smallmid. It trades about 0.17 of its potential returns per unit of risk. State Street Smallmid is currently generating about 0.17 per unit of risk. If you would invest  924.00  in Europac Gold Fund on October 23, 2024 and sell it today you would earn a total of  41.00  from holding Europac Gold Fund or generate 4.44% return on investment over 90 days.

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

Europac Gold Fund  vs.  State Street Smallmid

Europac Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europac Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

State Street Smallmid

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Smallmid are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, State Street may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Europac Gold and State Street

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

The idea behind Europac Gold Fund and State Street Smallmid 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.