Correlation Between Capital Appreciation and T Rowe

Can any of the company-specific risk be diversified away by investing in both Capital Appreciation 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 Capital Appreciation and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Appreciation Fund and T Rowe Price, you can compare the effects of market volatilities on Capital Appreciation 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 Capital Appreciation with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Appreciation and T Rowe.

Diversification Opportunities for Capital Appreciation and T Rowe

0.89

Correlation Coefficient

Capital Appreciation  T Rowe

Very poor diversification

The 3 months correlation between Capital and TRBCX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Capital Appreciation Fund 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 Capital Appreciation 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 Capital Appreciation Fund 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 Capital Appreciation i.e., Capital Appreciation and T Rowe go up and down completely randomly.

Pair Corralation between Capital Appreciation and T Rowe

Assuming the 90 days horizon Capital Appreciation Fund is expected to generate 0.67 times more return on investment than T Rowe. However, Capital Appreciation Fund is 1.5 times less risky than T Rowe. It trades about 0.19 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.04 per unit of risk. If you would invest  1,650  in Capital Appreciation Fund on September 16, 2024 and sell it today you would earn a total of  202.00  from holding Capital Appreciation Fund or generate 12.24% return on investment over 90 days.

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

Capital Appreciation Fund  vs.  T Rowe Price

Capital Appreciation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Appreciation Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Capital Appreciation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

T Rowe Price

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital Appreciation and T Rowe

The main advantage of trading using opposite Capital Appreciation and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Appreciation 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.

The idea behind Capital Appreciation Fund and T Rowe Price 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.