Correlation Between T Rowe and Parametric Commodity

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

Diversification Opportunities for T Rowe and Parametric Commodity

0.75

Correlation Coefficient

T Rowe  Parametric Commodity

Poor diversification

The 3 months correlation between PRFRX and Parametric is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Parametric Modity Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Commodity 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 Parametric Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Commodity has no effect on the direction of T Rowe i.e., T Rowe and Parametric Commodity go up and down completely randomly.

Pair Corralation between T Rowe and Parametric Commodity

Assuming the 90 days horizon T Rowe Price is expected to generate 0.24 times more return on investment than Parametric Commodity. However, T Rowe Price is 4.15 times less risky than Parametric Commodity. It trades about -0.07 of its potential returns per unit of risk. Parametric Modity Strategy is currently generating about -0.02 per unit of risk. If you would invest  925.00  in T Rowe Price on February 1, 2025 and sell it today you would lose (9.00) from holding T Rowe Price or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

T Rowe Price  vs.  Parametric Modity Strategy

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 fairly strong basic indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parametric Commodity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parametric Modity Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Parametric Commodity 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 Parametric Commodity

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

The idea behind T Rowe Price and Parametric Modity Strategy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.