Correlation Between Nasdaq and Schwab Target

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

By analyzing existing cross correlation between Nasdaq Inc and Schwab Target 2055, you can compare the effects of market volatilities on Nasdaq and Schwab Target 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 Nasdaq with a short position of Schwab Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Schwab Target.

Diversification Opportunities for Nasdaq and Schwab Target

0.51

Correlation Coefficient

Nasdaq  Schwab Target

Very weak diversification

The 3 months correlation between Nasdaq and Schwab is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Schwab Target 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Target 2055 and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Schwab Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Target 2055 has no effect on the direction of Nasdaq i.e., Nasdaq and Schwab Target go up and down completely randomly.

Pair Corralation between Nasdaq and Schwab Target

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.9 times more return on investment than Schwab Target. However, Nasdaq Inc is 1.11 times less risky than Schwab Target. It trades about -0.17 of its potential returns per unit of risk. Schwab Target 2055 is currently generating about -0.22 per unit of risk. If you would invest  8,114  in Nasdaq Inc on October 7, 2024 and sell it today you would lose (292.00) from holding Nasdaq Inc or give up 3.6% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Schwab Target 2055

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Schwab Target 2055

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Target 2055 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Schwab Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Schwab Target

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

The idea behind Nasdaq Inc and Schwab Target 2055 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.