Correlation Between Main Street and T Rowe
Can any of the company-specific risk be diversified away by investing in both Main Street 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 Main Street and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Street Capital and T Rowe Price, you can compare the effects of market volatilities on Main Street 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 Main Street with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and T Rowe.
Diversification Opportunities for Main Street and T Rowe
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Main and TROW is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital 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 Main Street 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 Main Street Capital 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 Main Street i.e., Main Street and T Rowe go up and down completely randomly.
Pair Corralation between Main Street and T Rowe
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.67 times more return on investment than T Rowe. However, Main Street Capital is 1.5 times less risky than T Rowe. It trades about 0.15 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.05 per unit of risk. If you would invest 4,583 in Main Street Capital on August 27, 2024 and sell it today you would earn a total of 868.00 from holding Main Street Capital or generate 18.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. T Rowe Price
Performance |
| Timeline |
| Main Street Capital |
| T Rowe Price |
Main Street and T Rowe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and T Rowe
The main advantage of trading using opposite Main Street and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
| T Rowe vs. Invesco Plc | T Rowe vs. Bank of New | T Rowe vs. Principal Financial Group | T Rowe vs. Ameriprise Financial |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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