Correlation Between T Rowe and Sextant Core

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

Diversification Opportunities for T Rowe and Sextant Core

0.73

Correlation Coefficient

T Rowe  Sextant Core

Poor diversification

The 3 months correlation between TRFHX and Sextant is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Sextant E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant E Fund 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 Sextant Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant E Fund has no effect on the direction of T Rowe i.e., T Rowe and Sextant Core go up and down completely randomly.

Pair Corralation between T Rowe and Sextant Core

Assuming the 90 days horizon T Rowe Price is expected to generate 0.92 times more return on investment than Sextant Core. However, T Rowe Price is 1.09 times less risky than Sextant Core. It trades about 0.05 of its potential returns per unit of risk. Sextant E Fund is currently generating about -0.03 per unit of risk. If you would invest  2,565  in T Rowe Price on December 28, 2024 and sell it today you would earn a total of  42.00  from holding T Rowe Price or generate 1.64% return on investment over 90 days.

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

T Rowe Price  vs.  Sextant E Fund

T Rowe Price

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sextant E Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sextant E Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sextant Core 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 Sextant Core

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

The idea behind T Rowe Price and Sextant E 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.