Correlation Between Inflation Protection and T Rowe

Can any of the company-specific risk be diversified away by investing in both Inflation Protection and T Rowe 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 Inflation Protection and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inflation Protection Fund and T Rowe Price, you can compare the effects of market volatilities on Inflation Protection and T Rowe 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 Inflation Protection with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Protection and T Rowe.

Diversification Opportunities for Inflation Protection and T Rowe

0.2

Correlation Coefficient

Inflation Protection  T Rowe

Modest diversification

The 3 months correlation between Inflation and RRTLX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protection Fund and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and Inflation Protection 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 Inflation Protection Fund are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Inflation Protection i.e., Inflation Protection and T Rowe go up and down completely randomly.

Pair Corralation between Inflation Protection and T Rowe

Assuming the 90 days horizon Inflation Protection Fund is expected to under-perform the T Rowe. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inflation Protection Fund is 1.05 times less risky than T Rowe. The mutual fund trades about -0.06 of its potential returns per unit of risk. The T Rowe Price is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,247  in T Rowe Price on September 12, 2024 and sell it today you would earn a total of  23.00  from holding T Rowe Price or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Inflation Protection Fund  vs.  T Rowe Price

Inflation Protection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inflation Protection Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Inflation Protection is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 strong essential indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inflation Protection and T Rowe

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

The idea behind Inflation Protection Fund and T Rowe Price 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.