Correlation Between Europacific Growth and Absolute Convertible

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

Diversification Opportunities for Europacific Growth and Absolute Convertible

0.76

Correlation Coefficient

Europacific Growth  Absolute Convertible

Poor diversification

The 3 months correlation between Europacific and Absolute is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible 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 Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Europacific Growth i.e., Europacific Growth and Absolute Convertible go up and down completely randomly.

Pair Corralation between Europacific Growth and Absolute Convertible

Assuming the 90 days horizon Europacific Growth Fund is expected to generate 18.53 times more return on investment than Absolute Convertible. However, Europacific Growth is 18.53 times more volatile than Absolute Convertible Arbitrage. It trades about 0.11 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.7 per unit of risk. If you would invest  5,430  in Europacific Growth Fund on December 25, 2024 and sell it today you would earn a total of  329.00  from holding Europacific Growth Fund or generate 6.06% return on investment over 90 days.

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

Europacific Growth Fund  vs.  Absolute Convertible Arbitrage

Europacific Growth

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Europacific Growth Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Europacific Growth may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Absolute Convertible

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Convertible Arbitrage are ranked lower than 55 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Convertible 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 Absolute Convertible

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

The idea behind Europacific Growth Fund and Absolute Convertible Arbitrage 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.