Correlation Between Europac Gold and First Trust

Can any of the company-specific risk be diversified away by investing in both Europac Gold and First Trust 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 Europac Gold and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Europac Gold Fund and First Trust Nasdaq, you can compare the effects of market volatilities on Europac Gold and First Trust 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 Europac Gold with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europac Gold and First Trust.

Diversification Opportunities for Europac Gold and First Trust

0.29

Correlation Coefficient

Europac Gold  First Trust

Modest diversification

The 3 months correlation between EUROPAC and First is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Europac Gold Fund and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Europac Gold 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 Europac Gold Fund are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Europac Gold i.e., Europac Gold and First Trust go up and down completely randomly.

Pair Corralation between Europac Gold and First Trust

Assuming the 90 days horizon Europac Gold Fund is expected to generate 1.6 times more return on investment than First Trust. However, Europac Gold is 1.6 times more volatile than First Trust Nasdaq. It trades about 0.13 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.04 per unit of risk. If you would invest  1,020  in Europac Gold Fund on February 3, 2025 and sell it today you would earn a total of  183.00  from holding Europac Gold Fund or generate 17.94% return on investment over 90 days.

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

Europac Gold Fund  vs.  First Trust Nasdaq

Europac Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Europac Gold Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Europac Gold showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Nasdaq

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Europac Gold and First Trust

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

The idea behind Europac Gold Fund and First Trust Nasdaq 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.