Correlation Between T Rowe and Applied Finance

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

Diversification Opportunities for T Rowe and Applied Finance

0.54

Correlation Coefficient

T Rowe  Applied Finance

Very weak diversification

The 3 months correlation between TILCX and Applied is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer 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 Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of T Rowe i.e., T Rowe and Applied Finance go up and down completely randomly.

Pair Corralation between T Rowe and Applied Finance

Assuming the 90 days horizon T Rowe is expected to generate 1.53 times less return on investment than Applied Finance. But when comparing it to its historical volatility, T Rowe Price is 1.53 times less risky than Applied Finance. It trades about 0.17 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,008  in Applied Finance Explorer on April 29, 2025 and sell it today you would earn a total of  230.00  from holding Applied Finance Explorer or generate 11.45% return on investment over 90 days.

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

T Rowe Price  vs.  Applied Finance Explorer

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 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Applied Finance Explorer

Risk-Adjusted Performance

Good

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

Pair Trading with T Rowe and Applied Finance

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

The idea behind T Rowe Price and Applied Finance Explorer 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.