Correlation Between Schwab Fundamental and Timothy Plan

Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and Timothy Plan 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 Schwab Fundamental and Timothy Plan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schwab Fundamental Small and Timothy Plan Small, you can compare the effects of market volatilities on Schwab Fundamental and Timothy Plan 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 Schwab Fundamental with a short position of Timothy Plan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and Timothy Plan.

Diversification Opportunities for Schwab Fundamental and Timothy Plan

0.99

Correlation Coefficient

Schwab Fundamental  Timothy Plan

No risk reduction

The 3 months correlation between Schwab and Timothy is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Small and Timothy Plan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Small and Schwab Fundamental 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 Schwab Fundamental Small are associated (or correlated) with Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Small has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Timothy Plan go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Timothy Plan

Given the investment horizon of 90 days Schwab Fundamental Small is expected to under-perform the Timothy Plan. In addition to that, Schwab Fundamental is 1.04 times more volatile than Timothy Plan Small. It trades about -0.11 of its total potential returns per unit of risk. Timothy Plan Small is currently generating about -0.08 per unit of volatility. If you would invest  3,895  in Timothy Plan Small on December 29, 2024 and sell it today you would lose (208.00) from holding Timothy Plan Small or give up 5.34% of portfolio value over 90 days.

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

Schwab Fundamental Small  vs.  Timothy Plan Small

Schwab Fundamental Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Fundamental Small has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Timothy Plan Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timothy Plan Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Timothy Plan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Schwab Fundamental and Timothy Plan

The main advantage of trading using opposite Schwab Fundamental and Timothy Plan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, Timothy Plan 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 Timothy Plan will offset losses from the drop in Timothy Plan's long position.

The idea behind Schwab Fundamental Small and Timothy Plan Small 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.