Correlation Between All Asset and Europacific Growth

Can any of the company-specific risk be diversified away by investing in both All Asset 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 All Asset and Europacific Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between All Asset Fund and Europacific Growth Fund, you can compare the effects of market volatilities on All Asset 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 All Asset with a short position of Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Asset and Europacific Growth.

Diversification Opportunities for All Asset and Europacific Growth

0.84

Correlation Coefficient

All Asset  Europacific Growth

Very poor diversification

The 3 months correlation between All and Europacific is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth and All Asset 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 All Asset Fund 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 All Asset i.e., All Asset and Europacific Growth go up and down completely randomly.

Pair Corralation between All Asset and Europacific Growth

Assuming the 90 days horizon All Asset Fund is expected to generate 0.36 times more return on investment than Europacific Growth. However, All Asset Fund is 2.78 times less risky than Europacific Growth. It trades about 0.05 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about -0.04 per unit of risk. If you would invest  1,081  in All Asset Fund on September 30, 2024 and sell it today you would earn a total of  22.00  from holding All Asset Fund or generate 2.04% return on investment over 90 days.

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

All Asset Fund  vs.  Europacific Growth Fund

All Asset Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with All Asset and Europacific Growth

The main advantage of trading using opposite All Asset and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Asset 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.

The idea behind All Asset Fund and Europacific Growth Fund 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.