Correlation Between Schwab Dividend and SPDR Portfolio

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

Diversification Opportunities for Schwab Dividend and SPDR Portfolio

0.94

Correlation Coefficient

Schwab Dividend  SPDR Portfolio

Almost no diversification

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

Pair Corralation between Schwab Dividend and SPDR Portfolio

Given the investment horizon of 90 days Schwab Dividend Equity is expected to generate 1.0 times more return on investment than SPDR Portfolio. However, Schwab Dividend Equity is 1.0 times less risky than SPDR Portfolio. It trades about 0.07 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.06 per unit of risk. If you would invest  2,699  in Schwab Dividend Equity on December 28, 2024 and sell it today you would earn a total of  81.00  from holding Schwab Dividend Equity or generate 3.0% return on investment over 90 days.

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

Schwab Dividend Equity  vs.  SPDR Portfolio SP

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.

SPDR Portfolio SP

Risk-Adjusted Performance

Modest

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

Pair Trading with Schwab Dividend and SPDR Portfolio

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

The idea behind Schwab Dividend Equity and SPDR Portfolio SP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.