Correlation Between Aig Government and T Rowe

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

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

Diversification Opportunities for Aig Government and T Rowe

0.72

Correlation Coefficient

Aig Government  T Rowe

Poor diversification

The 3 months correlation between Aig and TEUIX is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aig Government Money 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 Aig Government 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 Aig Government Money 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 Aig Government i.e., Aig Government and T Rowe go up and down completely randomly.

Pair Corralation between Aig Government and T Rowe

Assuming the 90 days horizon Aig Government is expected to generate 17.2 times less return on investment than T Rowe. But when comparing it to its historical volatility, Aig Government Money is 5.29 times less risky than T Rowe. It trades about 0.07 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,257  in T Rowe Price on December 20, 2024 and sell it today you would earn a total of  286.00  from holding T Rowe Price or generate 12.67% return on investment over 90 days.

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

Aig Government Money  vs.  T Rowe Price

Aig Government Money

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aig Government Money are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aig Government 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, T Rowe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aig Government and T Rowe

The main advantage of trading using opposite Aig Government and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aig Government 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 Aig Government Money 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.