Correlation Between Europac Gold and Alpha Architect

Can any of the company-specific risk be diversified away by investing in both Europac Gold and Alpha Architect 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 Alpha Architect 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 Alpha Architect ETF, you can compare the effects of market volatilities on Europac Gold and Alpha Architect 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 Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europac Gold and Alpha Architect.

Diversification Opportunities for Europac Gold and Alpha Architect

-0.59

Correlation Coefficient

Europac Gold  Alpha Architect

Excellent diversification

The 3 months correlation between EUROPAC and Alpha is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Europac Gold Fund and Alpha Architect ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect ETF 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 Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect ETF has no effect on the direction of Europac Gold i.e., Europac Gold and Alpha Architect go up and down completely randomly.

Pair Corralation between Europac Gold and Alpha Architect

Assuming the 90 days horizon Europac Gold Fund is expected to generate 1.07 times more return on investment than Alpha Architect. However, Europac Gold is 1.07 times more volatile than Alpha Architect ETF. It trades about 0.13 of its potential returns per unit of risk. Alpha Architect ETF is currently generating about -0.06 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Europac Gold Fund  vs.  Alpha Architect ETF

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.

Alpha Architect ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Architect ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Europac Gold and Alpha Architect

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

The idea behind Europac Gold Fund and Alpha Architect ETF 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.