Correlation Between T Rowe and Pax Balanced

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

Diversification Opportunities for T Rowe and Pax Balanced

0.87

Correlation Coefficient

T Rowe  Pax Balanced

Very poor diversification

The 3 months correlation between TRSAX and Pax is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced 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 Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of T Rowe i.e., T Rowe and Pax Balanced go up and down completely randomly.

Pair Corralation between T Rowe and Pax Balanced

Assuming the 90 days horizon T Rowe Price is expected to under-perform the Pax Balanced. In addition to that, T Rowe is 2.16 times more volatile than Pax Balanced Fund. It trades about -0.11 of its total potential returns per unit of risk. Pax Balanced Fund is currently generating about -0.06 per unit of volatility. If you would invest  2,682  in Pax Balanced Fund on December 19, 2024 and sell it today you would lose (68.00) from holding Pax Balanced Fund or give up 2.54% of portfolio value over 90 days.

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

T Rowe Price  vs.  Pax Balanced 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.

Pax Balanced

Risk-Adjusted Performance

Very Weak

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

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

The idea behind T Rowe Price and Pax Balanced 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.