Correlation Between T Rowe and Global Payments

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

Diversification Opportunities for T Rowe and Global Payments

-0.35

Correlation Coefficient

T Rowe  Global Payments

Very good diversification

The 3 months correlation between RRTLX and Global is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 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 Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of T Rowe i.e., T Rowe and Global Payments go up and down completely randomly.

Pair Corralation between T Rowe and Global Payments

Assuming the 90 days horizon T Rowe Price is expected to generate 0.26 times more return on investment than Global Payments. However, T Rowe Price is 3.82 times less risky than Global Payments. It trades about 0.0 of its potential returns per unit of risk. Global Payments is currently generating about -0.08 per unit of risk. If you would invest  1,180  in T Rowe Price on February 1, 2024 and sell it today you would earn a total of  0.00  from holding T Rowe Price or generate 0.0% return on investment over 90 days.

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

T Rowe Price  vs.  Global Payments

T Rowe Price

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Payments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with T Rowe and Global Payments

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

The idea behind T Rowe Price and Global Payments 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.