Correlation Between Annaly Capital and T Rowe

Can any of the company-specific risk be diversified away by investing in both Annaly Capital and T Rowe 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 Annaly Capital and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Annaly Capital Management and T Rowe Price, you can compare the effects of market volatilities on Annaly Capital and T Rowe 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 Annaly Capital with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and T Rowe.

Diversification Opportunities for Annaly Capital and T Rowe

0.73

Correlation Coefficient

Annaly Capital  T Rowe

Poor diversification

The 3 months correlation between Annaly and TROW is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and Annaly Capital 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 Annaly Capital Management are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Annaly Capital i.e., Annaly Capital and T Rowe go up and down completely randomly.

Pair Corralation between Annaly Capital and T Rowe

Considering the 90-day investment horizon Annaly Capital Management is expected to generate 0.95 times more return on investment than T Rowe. However, Annaly Capital Management is 1.06 times less risky than T Rowe. It trades about -0.21 of its potential returns per unit of risk. T Rowe Price is currently generating about -0.25 per unit of risk. If you would invest  1,920  in Annaly Capital Management on January 20, 2024 and sell it today you would lose (121.00) from holding Annaly Capital Management or give up 6.3% of portfolio value over 90 days.

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

Annaly Capital Management  vs.  T Rowe Price

Annaly Capital Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Annaly Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Annaly Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

T Rowe Price

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, T Rowe is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Annaly Capital and T Rowe

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

The idea behind Annaly Capital Management and T Rowe Price 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.