Correlation Between T Rowe and Federated Premier

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

Diversification Opportunities for T Rowe and Federated Premier

-0.37

Correlation Coefficient

T Rowe  Federated Premier

Very good diversification

The 3 months correlation between TROW and Federated is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier 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 Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of T Rowe i.e., T Rowe and Federated Premier go up and down completely randomly.

Pair Corralation between T Rowe and Federated Premier

Given the investment horizon of 90 days T Rowe Price is expected to generate 3.75 times more return on investment than Federated Premier. However, T Rowe is 3.75 times more volatile than Federated Premier Municipal. It trades about 0.05 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.09 per unit of risk. If you would invest  10,710  in T Rowe Price on February 5, 2024 and sell it today you would earn a total of  440.00  from holding T Rowe Price or generate 4.11% return on investment over 90 days.

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

T Rowe Price  vs.  Federated Premier Municipal

T Rowe Price

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Federated Premier

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Premier Municipal are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Federated Premier

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

The idea behind T Rowe Price and Federated Premier Municipal 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.