Correlation Between T Rowe and Sp Smallcap

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

Diversification Opportunities for T Rowe and Sp Smallcap

0.61

Correlation Coefficient

T Rowe  Sp Smallcap

Poor diversification

The 3 months correlation between PASVX and SMCIX is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Sp Smallcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap Index 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap Index has no effect on the direction of T Rowe i.e., T Rowe and Sp Smallcap go up and down completely randomly.

Pair Corralation between T Rowe and Sp Smallcap

Assuming the 90 days horizon T Rowe is expected to generate 1.34 times less return on investment than Sp Smallcap. But when comparing it to its historical volatility, T Rowe Price is 1.18 times less risky than Sp Smallcap. It trades about 0.14 of its potential returns per unit of risk. Sp Smallcap Index is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,065  in Sp Smallcap Index on April 29, 2025 and sell it today you would earn a total of  69.00  from holding Sp Smallcap Index or generate 3.34% return on investment over 90 days.

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

T Rowe Price  vs.  Sp Smallcap Index

T Rowe Price

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 12 (%) 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 August 2025.

Sp Smallcap Index

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Sp Smallcap may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with T Rowe and Sp Smallcap

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

The idea behind T Rowe Price and Sp Smallcap Index 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.