Correlation Between Value Line and Europacific Growth

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

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

Diversification Opportunities for Value Line and Europacific Growth

-0.16

Correlation Coefficient

Value Line  Europacific Growth

Good diversification

The 3 months correlation between Value and Europacific is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Select and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth and Value Line 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 Value Line Select 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 Value Line i.e., Value Line and Europacific Growth go up and down completely randomly.

Pair Corralation between Value Line and Europacific Growth

Assuming the 90 days horizon Value Line Select is expected to generate 0.96 times more return on investment than Europacific Growth. However, Value Line Select is 1.04 times less risky than Europacific Growth. It trades about 0.11 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about -0.02 per unit of risk. If you would invest  3,943  in Value Line Select on August 31, 2024 and sell it today you would earn a total of  201.00  from holding Value Line Select or generate 5.1% return on investment over 90 days.

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

Value Line Select  vs.  Europacific Growth Fund

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.

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.

Pair Trading with Value Line and Europacific Growth

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

Check out your portfolio center.

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.