Correlation Between T Rowe and Katapult Holdings

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

Diversification Opportunities for T Rowe and Katapult Holdings

-0.67

Correlation Coefficient

T Rowe  Katapult Holdings

Excellent diversification

The 3 months correlation between RRTLX and Katapult is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Katapult Holdings Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katapult Holdings Equity 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 Katapult Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katapult Holdings Equity has no effect on the direction of T Rowe i.e., T Rowe and Katapult Holdings go up and down completely randomly.

Pair Corralation between T Rowe and Katapult Holdings

Assuming the 90 days horizon T Rowe is expected to generate 15.27 times less return on investment than Katapult Holdings. But when comparing it to its historical volatility, T Rowe Price is 42.58 times less risky than Katapult Holdings. It trades about 0.11 of its potential returns per unit of risk. Katapult Holdings Equity is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.57  in Katapult Holdings Equity on July 15, 2024 and sell it today you would lose (0.02) from holding Katapult Holdings Equity or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

T Rowe Price  vs.  Katapult Holdings Equity

T Rowe Price

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 7 (%) 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.

Katapult Holdings Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Katapult Holdings Equity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Katapult Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Rowe and Katapult Holdings

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

The idea behind T Rowe Price and Katapult Holdings Equity 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.