Correlation Between Virginia Tax-free and T Rowe

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Can any of the company-specific risk be diversified away by investing in both Virginia Tax-free 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 Virginia Tax-free and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virginia Tax Free Bond and T Rowe Price, you can compare the effects of market volatilities on Virginia Tax-free 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 Virginia Tax-free with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virginia Tax-free and T Rowe.

Diversification Opportunities for Virginia Tax-free and T Rowe

VirginiaTRMCXDiversified AwayVirginiaTRMCXDiversified Away100%
0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Virginia and TRMCX is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Virginia Tax Free Bond 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 Virginia Tax-free 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 Virginia Tax Free Bond 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 Virginia Tax-free i.e., Virginia Tax-free and T Rowe go up and down completely randomly.

Pair Corralation between Virginia Tax-free and T Rowe

Assuming the 90 days horizon Virginia Tax-free is expected to generate 2.02 times less return on investment than T Rowe. But when comparing it to its historical volatility, Virginia Tax Free Bond is 3.92 times less risky than T Rowe. It trades about 0.07 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,757  in T Rowe Price on November 30, 2024 and sell it today you would earn a total of  447.00  from holding T Rowe Price or generate 16.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Virginia Tax Free Bond  vs.  T Rowe Price

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 05101520
JavaScript chart by amCharts 3.21.15TFBVX TRMCX
       Timeline  
Virginia Tax Free 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Virginia Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virginia Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.0511.111.1511.211.2511.311.3511.4
T Rowe Price 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32333435363738

Virginia Tax-free and T Rowe Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.35-0.15-0.0735-0.0367-0.0018370.03360.0690.120.320.52 12345
JavaScript chart by amCharts 3.21.15TFBVX TRMCX
       Returns  

Pair Trading with Virginia Tax-free and T Rowe

The main advantage of trading using opposite Virginia Tax-free and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virginia Tax-free 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 Virginia Tax Free Bond 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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