Correlation Between T Rowe and Ares Capital
Can any of the company-specific risk be diversified away by investing in both T Rowe and Ares Capital 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 Ares Capital 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 Ares Capital, you can compare the effects of market volatilities on T Rowe and Ares Capital 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 Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Ares Capital.
Diversification Opportunities for T Rowe and Ares Capital
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TROW and Ares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital 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 Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of T Rowe i.e., T Rowe and Ares Capital go up and down completely randomly.
Pair Corralation between T Rowe and Ares Capital
Given the investment horizon of 90 days T Rowe Price is expected to generate 2.38 times more return on investment than Ares Capital. However, T Rowe is 2.38 times more volatile than Ares Capital. It trades about 0.26 of its potential returns per unit of risk. Ares Capital is currently generating about 0.1 per unit of risk. If you would invest 11,240 in T Rowe Price on August 27, 2024 and sell it today you would earn a total of 1,057 from holding T Rowe Price or generate 9.4% 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. Ares Capital
Performance |
| Timeline |
| T Rowe Price |
| Ares Capital |
T Rowe and Ares Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rowe and Ares Capital
The main advantage of trading using opposite T Rowe and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Ares Capital 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 Ares Capital will offset losses from the drop in Ares Capital's long position.| T Rowe vs. Invesco Plc | T Rowe vs. Bank of New | T Rowe vs. Principal Financial Group | T Rowe vs. Ameriprise Financial |
| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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