Correlation Between T Rowe and Option Care

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

Diversification Opportunities for T Rowe and Option Care

-0.24

Correlation Coefficient

T Rowe  Option Care

Very good diversification

The 3 months correlation between RRTLX and Option is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of T Rowe i.e., T Rowe and Option Care go up and down completely randomly.

Pair Corralation between T Rowe and Option Care

Assuming the 90 days horizon T Rowe Price is expected to generate 0.08 times more return on investment than Option Care. However, T Rowe Price is 11.93 times less risky than Option Care. It trades about 0.13 of its potential returns per unit of risk. Option Care Health is currently generating about -0.12 per unit of risk. If you would invest  1,240  in T Rowe Price on September 2, 2024 and sell it today you would earn a total of  31.00  from holding T Rowe Price or generate 2.5% return on investment over 90 days.

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

T Rowe Price  vs.  Option Care Health

T Rowe Price

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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.

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with T Rowe and Option Care

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

The idea behind T Rowe Price and Option Care Health 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.