Correlation Between Global Hard and Schwab Government

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

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

Diversification Opportunities for Global Hard and Schwab Government

-0.14

Correlation Coefficient

Global Hard  Schwab Government

Good diversification

The 3 months correlation between Global and Schwab is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Global Hard Assets and Schwab Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Government Money and Global Hard 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 Global Hard Assets are associated (or correlated) with Schwab Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Government Money has no effect on the direction of Global Hard i.e., Global Hard and Schwab Government go up and down completely randomly.

Pair Corralation between Global Hard and Schwab Government

Assuming the 90 days horizon Global Hard Assets is expected to under-perform the Schwab Government. In addition to that, Global Hard is 7.52 times more volatile than Schwab Government Money. It trades about -0.07 of its total potential returns per unit of risk. Schwab Government Money is currently generating about 0.13 per unit of volatility. If you would invest  99.00  in Schwab Government Money on December 2, 2024 and sell it today you would earn a total of  1.00  from holding Schwab Government Money or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Global Hard Assets  vs.  Schwab Government Money

Global Hard Assets

Risk-Adjusted Performance

Very Weak

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

Schwab Government Money

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Government Money are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Hard and Schwab Government

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

The idea behind Global Hard Assets and Schwab Government 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.