Correlation Between Salient Alternative and T Rowe

Can any of the company-specific risk be diversified away by investing in both Salient Alternative and T Rowe 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 Salient Alternative and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salient Alternative Beta and T Rowe Price, you can compare the effects of market volatilities on Salient Alternative and T Rowe 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 Salient Alternative with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient Alternative and T Rowe.

Diversification Opportunities for Salient Alternative and T Rowe

0.87

Correlation Coefficient

Salient Alternative  T Rowe

Very poor diversification

The 3 months correlation between Salient and PRNHX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Salient Alternative Beta and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and Salient Alternative 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 Salient Alternative Beta are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Salient Alternative i.e., Salient Alternative and T Rowe go up and down completely randomly.

Pair Corralation between Salient Alternative and T Rowe

Assuming the 90 days horizon Salient Alternative is expected to generate 7.68 times less return on investment than T Rowe. But when comparing it to its historical volatility, Salient Alternative Beta is 1.68 times less risky than T Rowe. It trades about 0.01 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,531  in T Rowe Price on October 10, 2024 and sell it today you would earn a total of  75.00  from holding T Rowe Price or generate 1.36% return on investment over 90 days.

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

Salient Alternative Beta  vs.  T Rowe Price

Salient Alternative Beta

Risk-Adjusted Performance

0 of 100

Very Weak

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

T Rowe Price

Risk-Adjusted Performance

1 of 100

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

Pair Trading with Salient Alternative and T Rowe

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

The idea behind Salient Alternative Beta and T Rowe Price 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.