Correlation Between T Rowe and Consumer Finance

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

Diversification Opportunities for T Rowe and Consumer Finance

0.85

Correlation Coefficient

T Rowe  Consumer Finance

Very poor diversification

The 3 months correlation between PRISX and Consumer is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Consumer Finance Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Finance Por 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 Consumer Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Finance Por has no effect on the direction of T Rowe i.e., T Rowe and Consumer Finance go up and down completely randomly.

Pair Corralation between T Rowe and Consumer Finance

Assuming the 90 days horizon T Rowe Price is expected to generate 0.82 times more return on investment than Consumer Finance. However, T Rowe Price is 1.23 times less risky than Consumer Finance. It trades about 0.02 of its potential returns per unit of risk. Consumer Finance Portfolio is currently generating about -0.06 per unit of risk. If you would invest  4,272  in T Rowe Price on December 22, 2024 and sell it today you would earn a total of  29.00  from holding T Rowe Price or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

T Rowe Price  vs.  Consumer Finance Portfolio

T Rowe Price

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Consumer Finance Por

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumer Finance Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Consumer Finance 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 Consumer Finance

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

The idea behind T Rowe Price and Consumer Finance Portfolio 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..