Correlation Between T Rowe and Polen Growth

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

Diversification Opportunities for T Rowe and Polen Growth

0.85

Correlation Coefficient

T Rowe  Polen Growth

Very poor diversification

The 3 months correlation between TRAIX and Polen is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Polen Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen Growth 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 Polen Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen Growth has no effect on the direction of T Rowe i.e., T Rowe and Polen Growth go up and down completely randomly.

Pair Corralation between T Rowe and Polen Growth

Assuming the 90 days horizon T Rowe is expected to generate 1.23 times less return on investment than Polen Growth. But when comparing it to its historical volatility, T Rowe Price is 2.02 times less risky than Polen Growth. It trades about 0.12 of its potential returns per unit of risk. Polen Growth Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,920  in Polen Growth Fund on September 12, 2024 and sell it today you would earn a total of  999.00  from holding Polen Growth Fund or generate 25.48% 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.  Polen Growth Fund

T Rowe Price

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polen Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polen Growth Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Polen Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Polen Growth

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

The idea behind T Rowe Price and Polen Growth 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.