Correlation Between IShares Interest and Schwab Strategic

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

By analyzing existing cross correlation between iShares Interest Rate and Schwab Strategic Trust, you can compare the effects of market volatilities on IShares Interest and Schwab Strategic 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 IShares Interest with a short position of Schwab Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Interest and Schwab Strategic.

Diversification Opportunities for IShares Interest and Schwab Strategic

0.27

Correlation Coefficient

IShares Interest  Schwab Strategic

Modest diversification

The 3 months correlation between IShares and Schwab is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares Interest Rate and Schwab Strategic Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Strategic Trust and IShares Interest 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 iShares Interest Rate are associated (or correlated) with Schwab Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Strategic Trust has no effect on the direction of IShares Interest i.e., IShares Interest and Schwab Strategic go up and down completely randomly.

Pair Corralation between IShares Interest and Schwab Strategic

Given the investment horizon of 90 days IShares Interest is expected to generate 6.67 times less return on investment than Schwab Strategic. In addition to that, IShares Interest is 6.52 times more volatile than Schwab Strategic Trust. It trades about 0.01 of its total potential returns per unit of risk. Schwab Strategic Trust is currently generating about 0.39 per unit of volatility. If you would invest  2,491  in Schwab Strategic Trust on December 29, 2024 and sell it today you would earn a total of  28.00  from holding Schwab Strategic Trust or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

iShares Interest Rate  vs.  Schwab Strategic Trust

iShares Interest Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Interest Rate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, IShares Interest is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Schwab Strategic Trust

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Strategic Trust are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Schwab Strategic is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Interest and Schwab Strategic

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

The idea behind iShares Interest Rate and Schwab Strategic Trust 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.