Correlation Between T Rowe and Nationwide Inflation

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

Diversification Opportunities for T Rowe and Nationwide Inflation

-0.53

Correlation Coefficient

T Rowe  Nationwide Inflation

Excellent diversification

The 3 months correlation between TRBCX and Nationwide is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Nationwide Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Inflation 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 Nationwide Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Inflation has no effect on the direction of T Rowe i.e., T Rowe and Nationwide Inflation go up and down completely randomly.

Pair Corralation between T Rowe and Nationwide Inflation

Assuming the 90 days horizon T Rowe Price is expected to generate 4.26 times more return on investment than Nationwide Inflation. However, T Rowe is 4.26 times more volatile than Nationwide Inflation Protected Securities. It trades about -0.05 of its potential returns per unit of risk. Nationwide Inflation Protected Securities is currently generating about -0.41 per unit of risk. If you would invest  19,137  in T Rowe Price on October 8, 2024 and sell it today you would lose (253.00) from holding T Rowe Price or give up 1.32% of portfolio value over 90 days.

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

T Rowe Price  vs.  Nationwide Inflation Protected

T Rowe Price

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 8 (%) 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 February 2025.

Nationwide Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Inflation Protected Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Nationwide Inflation 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 Nationwide Inflation

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

The idea behind T Rowe Price and Nationwide Inflation Protected Securities 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.