Correlation Between NEOS ETF and Schwab Dividend

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

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

Diversification Opportunities for NEOS ETF and Schwab Dividend

0.14

Correlation Coefficient

NEOS ETF  Schwab Dividend

Average diversification

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

Pair Corralation between NEOS ETF and Schwab Dividend

Given the investment horizon of 90 days NEOS ETF Trust is expected to generate 16.75 times more return on investment than Schwab Dividend. However, NEOS ETF is 16.75 times more volatile than Schwab Dividend Equity. It trades about 0.13 of its potential returns per unit of risk. Schwab Dividend Equity is currently generating about 0.07 per unit of risk. If you would invest  2,597  in NEOS ETF Trust on December 28, 2024 and sell it today you would earn a total of  2,401  from holding NEOS ETF Trust or generate 92.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

NEOS ETF Trust  vs.  Schwab Dividend Equity

NEOS ETF Trust

Risk-Adjusted Performance

OK

Over the last 90 days NEOS ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady basic indicators, NEOS ETF demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Schwab Dividend Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Dividend Equity are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Schwab Dividend is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NEOS ETF and Schwab Dividend

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

The idea behind NEOS ETF Trust and Schwab Dividend Equity 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.