Correlation Between T Rowe and CMG Holdings

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

Diversification Opportunities for T Rowe and CMG Holdings

0.04

Correlation Coefficient

T Rowe  CMG Holdings

Significant diversification

The 3 months correlation between RRTLX and CMG is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and CMG Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMG Holdings Group 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 CMG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMG Holdings Group has no effect on the direction of T Rowe i.e., T Rowe and CMG Holdings go up and down completely randomly.

Pair Corralation between T Rowe and CMG Holdings

Assuming the 90 days horizon T Rowe Price is expected to under-perform the CMG Holdings. But the mutual fund apears to be less risky and, when comparing its historical volatility, T Rowe Price is 29.38 times less risky than CMG Holdings. The mutual fund trades about -0.01 of its potential returns per unit of risk. The CMG Holdings Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.19  in CMG Holdings Group on September 23, 2024 and sell it today you would lose (0.01) from holding CMG Holdings Group or give up 5.26% of portfolio value over 90 days.

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

T Rowe Price  vs.  CMG Holdings Group

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 essential indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CMG Holdings Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMG Holdings Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CMG Holdings is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and CMG Holdings

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

The idea behind T Rowe Price and CMG Holdings Group 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.