Correlation Between T Rowe and Balanced Fund

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

Diversification Opportunities for T Rowe and Balanced Fund

0.8

Correlation Coefficient

T Rowe  Balanced Fund

Very poor diversification

The 3 months correlation between TRSAX and Balanced is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of T Rowe i.e., T Rowe and Balanced Fund go up and down completely randomly.

Pair Corralation between T Rowe and Balanced Fund

Assuming the 90 days horizon T Rowe Price is expected to generate 2.11 times more return on investment than Balanced Fund. However, T Rowe is 2.11 times more volatile than Balanced Fund Investor. It trades about 0.2 of its potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.1 per unit of risk. If you would invest  10,021  in T Rowe Price on September 13, 2024 and sell it today you would earn a total of  1,204  from holding T Rowe Price or generate 12.01% return on investment over 90 days.

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

T Rowe Price  vs.  Balanced Fund Investor

T Rowe Price

Risk-Adjusted Performance

15 of 100

Good

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 basic indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Balanced Fund Investor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund 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 Balanced Fund

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

The idea behind T Rowe Price and Balanced Fund Investor 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 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.