Correlation Between IShares BBB and T Rowe

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

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

Diversification Opportunities for IShares BBB and T Rowe

0.05

Correlation Coefficient

IShares BBB  T Rowe

Significant diversification

The 3 months correlation between IShares and THYF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares BBB Rated 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 IShares BBB 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 iShares BBB Rated 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 IShares BBB i.e., IShares BBB and T Rowe go up and down completely randomly.

Pair Corralation between IShares BBB and T Rowe

Given the investment horizon of 90 days iShares BBB Rated is expected to under-perform the T Rowe. In addition to that, IShares BBB is 1.62 times more volatile than T Rowe Price. It trades about -0.01 of its total potential returns per unit of risk. T Rowe Price is currently generating about 0.2 per unit of volatility. If you would invest  5,137  in T Rowe Price on October 24, 2024 and sell it today you would earn a total of  136.00  from holding T Rowe Price or generate 2.65% return on investment over 90 days.

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

iShares BBB Rated  vs.  T Rowe Price

iShares BBB Rated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares BBB Rated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, IShares BBB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

T Rowe Price

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, T Rowe is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares BBB and T Rowe

The main advantage of trading using opposite IShares BBB and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares BBB 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 iShares BBB Rated 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.