Correlation Between T Rowe and Cavanal Hill

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

Diversification Opportunities for T Rowe and Cavanal Hill

0.98

Correlation Coefficient

T Rowe  Cavanal Hill

Almost no diversification

The 3 months correlation between TADGX and Cavanal is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Cavanal Hill Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavanal Hill Hedged 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 Cavanal Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavanal Hill Hedged has no effect on the direction of T Rowe i.e., T Rowe and Cavanal Hill go up and down completely randomly.

Pair Corralation between T Rowe and Cavanal Hill

Assuming the 90 days horizon T Rowe is expected to generate 1.04 times less return on investment than Cavanal Hill. In addition to that, T Rowe is 1.03 times more volatile than Cavanal Hill Hedged. It trades about 0.62 of its total potential returns per unit of risk. Cavanal Hill Hedged is currently generating about 0.67 per unit of volatility. If you would invest  1,035  in Cavanal Hill Hedged on February 19, 2025 and sell it today you would earn a total of  129.00  from holding Cavanal Hill Hedged or generate 12.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

T Rowe Price  vs.  Cavanal Hill Hedged

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cavanal Hill Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cavanal Hill Hedged has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cavanal Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Cavanal Hill

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

The idea behind T Rowe Price and Cavanal Hill Hedged 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.