Correlation Between Schwab Dividend and NEOS ETF

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

Diversification Opportunities for Schwab Dividend and NEOS ETF

0.14

Correlation Coefficient

Schwab Dividend  NEOS ETF

Average diversification

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

Pair Corralation between Schwab Dividend and NEOS ETF

Given the investment horizon of 90 days Schwab Dividend is expected to generate 33.37 times less return on investment than NEOS ETF. But when comparing it to its historical volatility, Schwab Dividend Equity is 16.75 times less risky than NEOS ETF. It trades about 0.07 of its potential returns per unit of risk. NEOS ETF Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. 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

Schwab Dividend Equity  vs.  NEOS ETF Trust

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.

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.

Pair Trading with Schwab Dividend and NEOS ETF

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

The idea behind Schwab Dividend Equity and NEOS ETF Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.