Correlation Between Schwab Dividend and ProShares

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

By analyzing existing cross correlation between Schwab Dividend Equity and ProShares SP 500, you can compare the effects of market volatilities on Schwab Dividend and ProShares 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 Dividend with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Dividend and ProShares.

Diversification Opportunities for Schwab Dividend and ProShares

0.95

Correlation Coefficient

Schwab Dividend  ProShares

Almost no diversification

The 3 months correlation between Schwab and ProShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Dividend Equity and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and Schwab Dividend 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 Dividend Equity are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Schwab Dividend i.e., Schwab Dividend and ProShares go up and down completely randomly.

Pair Corralation between Schwab Dividend and ProShares

Given the investment horizon of 90 days Schwab Dividend Equity is expected to generate 0.99 times more return on investment than ProShares. However, Schwab Dividend Equity is 1.02 times less risky than ProShares. It trades about -0.04 of its potential returns per unit of risk. ProShares SP 500 is currently generating about -0.07 per unit of risk. If you would invest  2,907  in Schwab Dividend Equity on December 1, 2024 and sell it today you would lose (53.00) from holding Schwab Dividend Equity or give up 1.82% of portfolio value over 90 days.

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

Schwab Dividend Equity  vs.  ProShares SP 500

Schwab Dividend Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Dividend Equity has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ProShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, ProShares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Schwab Dividend and ProShares

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

The idea behind Schwab Dividend Equity and ProShares SP 500 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.