Correlation Between Schwab Strategic and Invesco ESG

Can any of the company-specific risk be diversified away by investing in both Schwab Strategic and Invesco ESG 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 Invesco ESG 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 Invesco ESG NASDAQ, you can compare the effects of market volatilities on Schwab Strategic and Invesco ESG 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 Invesco ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Strategic and Invesco ESG.

Diversification Opportunities for Schwab Strategic and Invesco ESG

0.87

Correlation Coefficient

Schwab Strategic  Invesco ESG

Very poor diversification

The 3 months correlation between Schwab and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Strategic Trust and Invesco ESG NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG NASDAQ 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 Invesco ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG NASDAQ has no effect on the direction of Schwab Strategic i.e., Schwab Strategic and Invesco ESG go up and down completely randomly.

Pair Corralation between Schwab Strategic and Invesco ESG

Given the investment horizon of 90 days Schwab Strategic is expected to generate 1.21 times less return on investment than Invesco ESG. In addition to that, Schwab Strategic is 1.05 times more volatile than Invesco ESG NASDAQ. It trades about 0.13 of its total potential returns per unit of risk. Invesco ESG NASDAQ is currently generating about 0.17 per unit of volatility. If you would invest  3,246  in Invesco ESG NASDAQ on September 15, 2024 and sell it today you would earn a total of  365.00  from holding Invesco ESG NASDAQ or generate 11.24% return on investment over 90 days.

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

Schwab Strategic Trust  vs.  Invesco ESG NASDAQ

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.

Invesco ESG NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco ESG NASDAQ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Invesco ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwab Strategic and Invesco ESG

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

The idea behind Schwab Strategic Trust and Invesco ESG NASDAQ 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.