Correlation Between Vanguard and Schwab Strategic

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

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

Diversification Opportunities for Vanguard and Schwab Strategic

0.93

Correlation Coefficient

Vanguard  Schwab Strategic

Almost no diversification

The 3 months correlation between Vanguard and Schwab is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap 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 Vanguard 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 Vanguard SP Mid Cap 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 Vanguard i.e., Vanguard and Schwab Strategic go up and down completely randomly.

Pair Corralation between Vanguard and Schwab Strategic

Given the investment horizon of 90 days Vanguard SP Mid Cap is expected to generate 0.93 times more return on investment than Schwab Strategic. However, Vanguard SP Mid Cap is 1.07 times less risky than Schwab Strategic. It trades about -0.09 of its potential returns per unit of risk. Schwab Strategic Trust is currently generating about -0.09 per unit of risk. If you would invest  10,498  in Vanguard SP Mid Cap on December 28, 2024 and sell it today you would lose (673.00) from holding Vanguard SP Mid Cap or give up 6.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Vanguard SP Mid Cap  vs.  Schwab Strategic Trust

Vanguard SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Schwab Strategic Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Strategic Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with Vanguard and Schwab Strategic

The main advantage of trading using opposite Vanguard and Schwab Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard SP Mid Cap 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..