Correlation Between T Rowe and Eafe Fund

Can any of the company-specific risk be diversified away by investing in both T Rowe and Eafe Fund 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 Eafe Fund 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 The Eafe Fund, you can compare the effects of market volatilities on T Rowe and Eafe Fund 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 Eafe Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Eafe Fund.

Diversification Opportunities for T Rowe and Eafe Fund

0.0

Correlation Coefficient

T Rowe  Eafe Fund

Pay attention - limited upside

The 3 months correlation between TRSAX and Eafe is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and The Eafe Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Fund 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 Eafe Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Fund has no effect on the direction of T Rowe i.e., T Rowe and Eafe Fund go up and down completely randomly.

Pair Corralation between T Rowe and Eafe Fund

If you would invest (100.00) in The Eafe Fund on December 28, 2024 and sell it today you would earn a total of  100.00  from holding The Eafe Fund or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

T Rowe Price  vs.  The Eafe Fund

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.

Eafe Fund

Risk-Adjusted Performance

Weak

Over the last 90 days The Eafe Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eafe Fund 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 Eafe Fund

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

The idea behind T Rowe Price and The Eafe 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.