Correlation Between Schwab Intermediate and Dimensional ETF

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

By analyzing existing cross correlation between Schwab Intermediate Term Treasury and Dimensional ETF Trust, you can compare the effects of market volatilities on Schwab Intermediate and Dimensional 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 Intermediate with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Intermediate and Dimensional ETF.

Diversification Opportunities for Schwab Intermediate and Dimensional ETF

0.98

Correlation Coefficient

Schwab Intermediate  Dimensional ETF

Almost no diversification

The 3 months correlation between Schwab and Dimensional is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Intermediate Term Treas and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Schwab Intermediate 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 Intermediate Term Treasury are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Schwab Intermediate i.e., Schwab Intermediate and Dimensional ETF go up and down completely randomly.

Pair Corralation between Schwab Intermediate and Dimensional ETF

Given the investment horizon of 90 days Schwab Intermediate Term Treasury is expected to under-perform the Dimensional ETF. But the etf apears to be less risky and, when comparing its historical volatility, Schwab Intermediate Term Treasury is 1.04 times less risky than Dimensional ETF. The etf trades about -0.18 of its potential returns per unit of risk. The Dimensional ETF Trust is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  4,218  in Dimensional ETF Trust on September 16, 2024 and sell it today you would lose (112.00) from holding Dimensional ETF Trust or give up 2.66% of portfolio value over 90 days.

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

Schwab Intermediate Term Treas  vs.  Dimensional ETF Trust

Schwab Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Intermediate Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Schwab Intermediate is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Schwab Intermediate and Dimensional ETF

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

The idea behind Schwab Intermediate Term Treasury and Dimensional 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.