Correlation Between Global Gold and T Rowe

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

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

Diversification Opportunities for Global Gold and T Rowe

-0.29

Correlation Coefficient

Global Gold  T Rowe

Very good diversification

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

Pair Corralation between Global Gold and T Rowe

Assuming the 90 days horizon Global Gold Fund is expected to generate 1.54 times more return on investment than T Rowe. However, Global Gold is 1.54 times more volatile than T Rowe Price. It trades about 0.33 of its potential returns per unit of risk. T Rowe Price is currently generating about -0.11 per unit of risk. If you would invest  1,163  in Global Gold Fund on December 29, 2024 and sell it today you would earn a total of  421.00  from holding Global Gold Fund or generate 36.2% return on investment over 90 days.

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

Global Gold Fund  vs.  T Rowe Price

Global Gold Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold showed solid returns over the last few months and may actually be approaching a breakup point.

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Global Gold and T Rowe

The main advantage of trading using opposite Global Gold and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Global Gold Fund and T Rowe Price 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.