Correlation Between T Rowe and Precious Metals

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

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

Diversification Opportunities for T Rowe and Precious Metals

0.05

Correlation Coefficient

T Rowe  Precious Metals

Significant diversification

The 3 months correlation between PARCX and Precious is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Precious Metals Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals Ultr and T Rowe 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 T Rowe Price are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals Ultr has no effect on the direction of T Rowe i.e., T Rowe and Precious Metals go up and down completely randomly.

Pair Corralation between T Rowe and Precious Metals

Assuming the 90 days horizon T Rowe Price is expected to generate 0.15 times more return on investment than Precious Metals. However, T Rowe Price is 6.61 times less risky than Precious Metals. It trades about 0.14 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about -0.01 per unit of risk. If you would invest  2,591  in T Rowe Price on September 3, 2024 and sell it today you would earn a total of  100.00  from holding T Rowe Price or generate 3.86% return on investment over 90 days.

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

T Rowe Price  vs.  Precious Metals Ultrasector

T Rowe Price

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Precious Metals Ultr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Precious Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Precious Metals

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

The idea behind T Rowe Price and Precious Metals Ultrasector 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.