Correlation Between T Rowe and Hong Kong

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

Diversification Opportunities for T Rowe and Hong Kong

0.03

Correlation Coefficient

T Rowe  Hong Kong

Significant diversification

The 3 months correlation between RRTLX and Hong is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Hong Kong Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Exchange 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Exchange has no effect on the direction of T Rowe i.e., T Rowe and Hong Kong go up and down completely randomly.

Pair Corralation between T Rowe and Hong Kong

Assuming the 90 days horizon T Rowe Price is expected to generate 0.21 times more return on investment than Hong Kong. However, T Rowe Price is 4.73 times less risky than Hong Kong. It trades about -0.12 of its potential returns per unit of risk. Hong Kong Exchange is currently generating about -0.03 per unit of risk. If you would invest  1,244  in T Rowe Price on October 1, 2024 and sell it today you would lose (36.00) from holding T Rowe Price or give up 2.89% of portfolio value over 90 days.

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

T Rowe Price  vs.  Hong Kong Exchange

T Rowe Price

Risk-Adjusted Performance

0 of 100

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

Hong Kong Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Kong Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Hong Kong 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 Hong Kong

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

The idea behind T Rowe Price and Hong Kong Exchange 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..