Correlation Between T Rowe and Omni Small-cap

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

Diversification Opportunities for T Rowe and Omni Small-cap

0.85

Correlation Coefficient

T Rowe  Omni Small-cap

Very poor diversification

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

Pair Corralation between T Rowe and Omni Small-cap

Assuming the 90 days horizon T Rowe Price is expected to generate 0.68 times more return on investment than Omni Small-cap. However, T Rowe Price is 1.48 times less risky than Omni Small-cap. It trades about 0.22 of its potential returns per unit of risk. Omni Small Cap Value is currently generating about 0.12 per unit of risk. If you would invest  18,045  in T Rowe Price on September 5, 2024 and sell it today you would earn a total of  2,565  from holding T Rowe Price or generate 14.21% 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.  Omni Small Cap Value

T Rowe Price

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, T Rowe showed solid returns over the last few months and may actually be approaching a breakup point.

Omni Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Small Cap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Omni Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with T Rowe and Omni Small-cap

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

The idea behind T Rowe Price and Omni Small Cap Value 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.