Correlation Between Schwab Dividend and Vanguard High

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

Diversification Opportunities for Schwab Dividend and Vanguard High

0.72

Correlation Coefficient

Schwab Dividend  Vanguard High

Poor diversification

The 3 months correlation between Schwab and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Dividend Equity and Vanguard High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Dividend 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 Vanguard High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Dividend has no effect on the direction of Schwab Dividend i.e., Schwab Dividend and Vanguard High go up and down completely randomly.

Pair Corralation between Schwab Dividend and Vanguard High

Given the investment horizon of 90 days Schwab Dividend Equity is expected to generate 1.04 times more return on investment than Vanguard High. However, Schwab Dividend is 1.04 times more volatile than Vanguard High Dividend. It trades about 0.05 of its potential returns per unit of risk. Vanguard High Dividend is currently generating about 0.02 per unit of risk. If you would invest  2,699  in Schwab Dividend Equity on December 29, 2024 and sell it today you would earn a total of  59.00  from holding Schwab Dividend Equity or generate 2.19% return on investment over 90 days.

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

Schwab Dividend Equity  vs.  Vanguard High Dividend

Schwab Dividend Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Dividend Equity are ranked lower than 3 (%) 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.

Vanguard High Dividend

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Schwab Dividend and Vanguard High

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

The idea behind Schwab Dividend Equity and Vanguard High Dividend 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.