Correlation Between Schwab Strategic and BlackRock Carbon

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

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

Diversification Opportunities for Schwab Strategic and BlackRock Carbon

0.94

Correlation Coefficient

Schwab Strategic  BlackRock Carbon

Almost no diversification

The 3 months correlation between Schwab and BlackRock is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Strategic Trust and BlackRock Carbon Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Carbon Tra and Schwab Strategic 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 Schwab Strategic Trust are associated (or correlated) with BlackRock Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Carbon Tra has no effect on the direction of Schwab Strategic i.e., Schwab Strategic and BlackRock Carbon go up and down completely randomly.

Pair Corralation between Schwab Strategic and BlackRock Carbon

Given the investment horizon of 90 days Schwab Strategic is expected to generate 1.18 times less return on investment than BlackRock Carbon. In addition to that, Schwab Strategic is 1.37 times more volatile than BlackRock Carbon Transition. It trades about 0.08 of its total potential returns per unit of risk. BlackRock Carbon Transition is currently generating about 0.13 per unit of volatility. If you would invest  5,173  in BlackRock Carbon Transition on September 14, 2024 and sell it today you would earn a total of  1,450  from holding BlackRock Carbon Transition or generate 28.03% return on investment over 90 days.

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

Schwab Strategic Trust  vs.  BlackRock Carbon Transition

Schwab Strategic Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Strategic Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Schwab Strategic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BlackRock Carbon Tra

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Carbon Transition are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, BlackRock Carbon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwab Strategic and BlackRock Carbon

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

The idea behind Schwab Strategic Trust and BlackRock Carbon Transition 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.