Correlation Between Kensington Active and T Rowe
Can any of the company-specific risk be diversified away by investing in both Kensington Active and T Rowe 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 Kensington Active and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kensington Active Advantage and T Rowe Price, you can compare the effects of market volatilities on Kensington Active and T Rowe 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 Kensington Active with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kensington Active and T Rowe.
Diversification Opportunities for Kensington Active and T Rowe
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kensington and TRRZX is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Active Advantage and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and Kensington Active 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 Kensington Active Advantage are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Kensington Active i.e., Kensington Active and T Rowe go up and down completely randomly.
Pair Corralation between Kensington Active and T Rowe
Assuming the 90 days horizon Kensington Active Advantage is expected to generate 0.68 times more return on investment than T Rowe. However, Kensington Active Advantage is 1.47 times less risky than T Rowe. It trades about 0.15 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.03 per unit of risk. If you would invest 1,002 in Kensington Active Advantage on September 12, 2024 and sell it today you would earn a total of 23.00 from holding Kensington Active Advantage or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kensington Active Advantage vs. T Rowe Price
Performance |
| Timeline |
| Kensington Active |
| T Rowe Price |
Kensington Active and T Rowe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kensington Active and T Rowe
The main advantage of trading using opposite Kensington Active and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kensington Active position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.| Kensington Active vs. Commonwealth Global Fund | Kensington Active vs. Ab Global Bond | Kensington Active vs. Legg Mason Global | Kensington Active vs. Alliancebernstein Global High |
| T Rowe vs. Artisan Emerging Markets | T Rowe vs. Calvert Developed Market | T Rowe vs. Locorr Market Trend | T Rowe vs. Siit Emerging Markets |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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