Correlation Between T Rowe and Guinness Atkinson
Can any of the company-specific risk be diversified away by investing in both T Rowe and Guinness Atkinson 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 Guinness Atkinson 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 Guinness Atkinson Asia, you can compare the effects of market volatilities on T Rowe and Guinness Atkinson 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 Guinness Atkinson. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Guinness Atkinson.
Diversification Opportunities for T Rowe and Guinness Atkinson
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TRAOX and Guinness is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Guinness Atkinson Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guinness Atkinson Asia 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 Guinness Atkinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guinness Atkinson Asia has no effect on the direction of T Rowe i.e., T Rowe and Guinness Atkinson go up and down completely randomly.
Pair Corralation between T Rowe and Guinness Atkinson
Assuming the 90 days horizon T Rowe is expected to generate 2.58 times less return on investment than Guinness Atkinson. But when comparing it to its historical volatility, T Rowe Price is 1.7 times less risky than Guinness Atkinson. It trades about 0.1 of its potential returns per unit of risk. Guinness Atkinson Asia is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,496 in Guinness Atkinson Asia on September 13, 2024 and sell it today you would earn a total of 47.00 from holding Guinness Atkinson Asia or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
T Rowe Price vs. Guinness Atkinson Asia
Performance |
| Timeline |
| T Rowe Price |
| Guinness Atkinson Asia |
T Rowe and Guinness Atkinson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rowe and Guinness Atkinson
The main advantage of trading using opposite T Rowe and Guinness Atkinson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Guinness Atkinson 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 Guinness Atkinson will offset losses from the drop in Guinness Atkinson's long position.The idea behind T Rowe Price and Guinness Atkinson Asia 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.| Guinness Atkinson vs. Guinness Atkinson China | Guinness Atkinson vs. Guinness Atkinson Global | Guinness Atkinson vs. Guinness Atkinson Global |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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