Correlation Between T Rowe and Catalystmillburn

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

Diversification Opportunities for T Rowe and Catalystmillburn

0.95

Correlation Coefficient

T Rowe  Catalystmillburn

Almost no diversification

The 3 months correlation between TRBCX and Catalystmillburn is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge 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 Catalystmillburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of T Rowe i.e., T Rowe and Catalystmillburn go up and down completely randomly.

Pair Corralation between T Rowe and Catalystmillburn

Assuming the 90 days horizon T Rowe Price is expected to generate 2.07 times more return on investment than Catalystmillburn. However, T Rowe is 2.07 times more volatile than Catalystmillburn Hedge Strategy. It trades about 0.2 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.25 per unit of risk. If you would invest  18,591  in T Rowe Price on September 12, 2024 and sell it today you would earn a total of  2,188  from holding T Rowe Price or generate 11.77% return on investment over 90 days.

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

T Rowe Price  vs.  Catalystmillburn Hedge Strateg

T Rowe Price

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Catalystmillburn Hedge

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Catalystmillburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with T Rowe and Catalystmillburn

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

The idea behind T Rowe Price and Catalystmillburn Hedge Strategy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.