Correlation Between T Rowe and Capital Appreciation

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

Diversification Opportunities for T Rowe and Capital Appreciation

0.89

Correlation Coefficient

T Rowe  Capital Appreciation

Very poor diversification

The 3 months correlation between PRNHX and Capital is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Capital Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Appreciation 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 Capital Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Appreciation has no effect on the direction of T Rowe i.e., T Rowe and Capital Appreciation go up and down completely randomly.

Pair Corralation between T Rowe and Capital Appreciation

Assuming the 90 days horizon T Rowe is expected to generate 1.92 times less return on investment than Capital Appreciation. In addition to that, T Rowe is 1.17 times more volatile than Capital Appreciation Fund. It trades about 0.09 of its total potential returns per unit of risk. Capital Appreciation Fund is currently generating about 0.2 per unit of volatility. If you would invest  1,706  in Capital Appreciation Fund on September 16, 2024 and sell it today you would earn a total of  146.00  from holding Capital Appreciation Fund or generate 8.56% return on investment over 90 days.

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

T Rowe Price  vs.  Capital Appreciation Fund

T Rowe Price

Risk-Adjusted Performance

9 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with T Rowe and Capital Appreciation

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

The idea behind T Rowe Price and Capital Appreciation Fund 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.