Correlation Between Stone Harbor and T Rowe
Can any of the company-specific risk be diversified away by investing in both Stone Harbor 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 Stone Harbor and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Harbor Local and T Rowe Price, you can compare the effects of market volatilities on Stone Harbor 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 Stone Harbor with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Harbor and T Rowe.
Diversification Opportunities for Stone Harbor and T Rowe
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Stone and PAELX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Stone Harbor Local 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 Stone Harbor 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 Stone Harbor Local 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 Stone Harbor i.e., Stone Harbor and T Rowe go up and down completely randomly.
Pair Corralation between Stone Harbor and T Rowe
Assuming the 90 days horizon Stone Harbor Local is expected to under-perform the T Rowe. In addition to that, Stone Harbor is 1.02 times more volatile than T Rowe Price. It trades about -0.27 of its total potential returns per unit of risk. T Rowe Price is currently generating about -0.21 per unit of volatility. If you would invest 484.00 in T Rowe Price on January 24, 2024 and sell it today you would lose (11.00) from holding T Rowe Price or give up 2.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Harbor Local vs. T Rowe Price
Performance |
| Timeline |
| Stone Harbor Local |
| T Rowe Price |
Stone Harbor and T Rowe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Harbor and T Rowe
The main advantage of trading using opposite Stone Harbor and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Harbor 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.| Stone Harbor vs. Stone Harbor Emerging | Stone Harbor vs. Stone Harbor Emerging | Stone Harbor vs. The Charles Schwab | Stone Harbor vs. State Street Core |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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