Can any of the company-specific risk be diversified away by investing in both Europacific Growth and Midcap Fund 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 Midcap Fund 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 Midcap Fund Class, you can compare the effects of market volatilities on Europacific Growth and Midcap Fund 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 Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and Midcap Fund.
Diversification Opportunities for Europacific Growth and Midcap Fund
The 3 months correlation between Europacific and Midcap is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and Midcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Class 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 Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Class has no effect on the direction of Europacific Growth i.e., Europacific Growth and Midcap Fund go up and down completely randomly.
Pair Corralation between Europacific Growth and Midcap Fund
Assuming the 90 days horizon Europacific Growth Fund is expected to generate 0.86 times more return on investment than Midcap Fund. However, Europacific Growth Fund is 1.16 times less risky than Midcap Fund. It trades about 0.05 of its potential returns per unit of risk. Midcap Fund Class is currently generating about -0.04 per unit of risk. If you would invest 5,861 in Europacific Growth Fund on March 6, 2024 and sell it today you would earn a total of 76.00 from holding Europacific Growth Fund or generate 1.3% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Europacific Growth Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.
Over the last 90 days Midcap Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.