Correlation Between American Funds and Schwab Target
Can any of the company-specific risk be diversified away by investing in both American Funds and Schwab Target 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 American Funds and Schwab Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2045 and Schwab Target 2045, you can compare the effects of market volatilities on American Funds and Schwab Target 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 American Funds with a short position of Schwab Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Schwab Target.
Diversification Opportunities for American Funds and Schwab Target
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Schwab is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2045 and Schwab Target 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Target 2045 and American Funds 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 American Funds 2045 are associated (or correlated) with Schwab Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Target 2045 has no effect on the direction of American Funds i.e., American Funds and Schwab Target go up and down completely randomly.
Pair Corralation between American Funds and Schwab Target
Assuming the 90 days horizon American Funds is expected to generate 1.17 times less return on investment than Schwab Target. In addition to that, American Funds is 1.03 times more volatile than Schwab Target 2045. It trades about 0.05 of its total potential returns per unit of risk. Schwab Target 2045 is currently generating about 0.06 per unit of volatility. If you would invest 1,563 in Schwab Target 2045 on December 2, 2024 and sell it today you would earn a total of 141.00 from holding Schwab Target 2045 or generate 9.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds 2045 vs. Schwab Target 2045
Performance |
Timeline |
American Funds 2045 |
Schwab Target 2045 |
American Funds and Schwab Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Schwab Target
The main advantage of trading using opposite American Funds and Schwab Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Schwab Target 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 Schwab Target will offset losses from the drop in Schwab Target's long position.American Funds vs. Tekla Healthcare Investors | American Funds vs. Highland Longshort Healthcare | American Funds vs. Schwab Health Care | American Funds vs. Blackrock Health Sciences |
Schwab Target vs. Harbor Diversified International | Schwab Target vs. Tax Free Conservative Income | Schwab Target vs. Global Diversified Income | Schwab Target vs. Tiaa Cref Lifestyle Conservative |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
Transaction History View history of all your transactions and understand their impact on performance | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |