Correlation Between Regional Management and T Rowe

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

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

Diversification Opportunities for Regional Management and T Rowe

-0.4

Correlation Coefficient

Regional Management  T Rowe

Very good diversification

The 3 months correlation between Regional and TROW is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp 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 Regional Management 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 Regional Management Corp 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 Regional Management i.e., Regional Management and T Rowe go up and down completely randomly.

Pair Corralation between Regional Management and T Rowe

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the T Rowe. In addition to that, Regional Management is 1.7 times more volatile than T Rowe Price. It trades about -0.03 of its total potential returns per unit of risk. T Rowe Price is currently generating about 0.19 per unit of volatility. If you would invest  10,479  in T Rowe Price on August 30, 2024 and sell it today you would earn a total of  1,937  from holding T Rowe Price or generate 18.48% return on investment over 90 days.

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

Regional Management Corp  vs.  T Rowe Price

Regional Management Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

T Rowe Price

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, T Rowe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regional Management and T Rowe

The main advantage of trading using opposite Regional Management and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management 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 Regional Management Corp 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.