Correlation Between First American and Schwab Us

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

By analyzing existing cross correlation between First American Funds and Schwab Treasury Money, you can compare the effects of market volatilities on First American and Schwab Us 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 First American with a short position of Schwab Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Schwab Us.

Diversification Opportunities for First American and Schwab Us

0.0

Correlation Coefficient

First American  Schwab Us

Pay attention - limited upside

The 3 months correlation between First and Schwab is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and Schwab Treasury Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Treasury Money and First American 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 First American Funds are associated (or correlated) with Schwab Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Treasury Money has no effect on the direction of First American i.e., First American and Schwab Us go up and down completely randomly.

Pair Corralation between First American and Schwab Us

Assuming the 90 days horizon First American Funds is expected to generate 141.09 times more return on investment than Schwab Us. However, First American is 141.09 times more volatile than Schwab Treasury Money. It trades about 0.03 of its potential returns per unit of risk. Schwab Treasury Money is currently generating about 0.12 per unit of risk. If you would invest  368.00  in First American Funds on December 2, 2024 and sell it today you would lose (268.00) from holding First American Funds or give up 72.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.35%
Values	Daily Returns

First American Funds  vs.  Schwab Treasury Money

First American Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days First American Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab Treasury Money

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Treasury Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Schwab Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First American and Schwab Us

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

The idea behind First American Funds and Schwab Treasury Money 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.