Correlation Between Europacific Growth and Value Line

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

Diversification Opportunities for Europacific Growth and Value Line

-0.16

Correlation Coefficient

Europacific Growth  Value Line

Good diversification

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

Pair Corralation between Europacific Growth and Value Line

Assuming the 90 days horizon Europacific Growth Fund is expected to under-perform the Value Line. But the mutual fund apears to be less risky and, when comparing its historical volatility, Europacific Growth Fund is 1.23 times less risky than Value Line. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Value Line Select is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,983  in Value Line Select on August 31, 2024 and sell it today you would earn a total of  161.00  from holding Value Line Select or generate 4.04% return on investment over 90 days.

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

Europacific Growth Fund  vs.  Value Line Select

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 fairly strong technical and fundamental indicators, Europacific Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Line Select

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Select are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Value Line 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 Value Line

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

The idea behind Europacific Growth Fund and Value Line Select 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.