Correlation Between T Rowe and Sit Government

Can any of the company-specific risk be diversified away by investing in both T Rowe and Sit Government 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 Sit Government 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 Sit Government Securities, you can compare the effects of market volatilities on T Rowe and Sit Government 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 Sit Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Sit Government.

Diversification Opportunities for T Rowe and Sit Government

0.65

Correlation Coefficient

T Rowe  Sit Government

Poor diversification

The 3 months correlation between PATFX and Sit is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Sit Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Government Securities 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 Sit Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Government Securities has no effect on the direction of T Rowe i.e., T Rowe and Sit Government go up and down completely randomly.

Pair Corralation between T Rowe and Sit Government

Assuming the 90 days horizon T Rowe Price is expected to generate 1.34 times more return on investment than Sit Government. However, T Rowe is 1.34 times more volatile than Sit Government Securities. It trades about -0.02 of its potential returns per unit of risk. Sit Government Securities is currently generating about -0.15 per unit of risk. If you would invest  1,137  in T Rowe Price on September 14, 2024 and sell it today you would lose (4.00) from holding T Rowe Price or give up 0.35% of portfolio value over 90 days.

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

T Rowe Price  vs.  Sit Government Securities

T Rowe Price

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and 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.

Sit Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit Government Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sit Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Sit Government

The main advantage of trading using opposite T Rowe and Sit Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Sit Government 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 Sit Government will offset losses from the drop in Sit Government's long position.

The idea behind T Rowe Price and Sit Government Securities 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.