Correlation Between Schwab Intermediate and JPMorgan Inflation

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

Diversification Opportunities for Schwab Intermediate and JPMorgan Inflation

0.79

Correlation Coefficient

Schwab Intermediate  JPMorgan Inflation

Poor diversification

The 3 months correlation between Schwab and JPMorgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Intermediate Term Treas and JPMorgan Inflation Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Inflation 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 JPMorgan Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Inflation has no effect on the direction of Schwab Intermediate i.e., Schwab Intermediate and JPMorgan Inflation go up and down completely randomly.

Pair Corralation between Schwab Intermediate and JPMorgan Inflation

Given the investment horizon of 90 days Schwab Intermediate is expected to generate 1.17 times less return on investment than JPMorgan Inflation. In addition to that, Schwab Intermediate is 1.42 times more volatile than JPMorgan Inflation Managed. It trades about 0.04 of its total potential returns per unit of risk. JPMorgan Inflation Managed is currently generating about 0.07 per unit of volatility. If you would invest  4,268  in JPMorgan Inflation Managed on September 20, 2024 and sell it today you would earn a total of  399.30  from holding JPMorgan Inflation Managed or generate 9.36% return on investment over 90 days.

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

Schwab Intermediate Term Treas  vs.  JPMorgan Inflation Managed

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.

JPMorgan Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Inflation Managed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, JPMorgan Inflation is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Schwab Intermediate and JPMorgan Inflation

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

The idea behind Schwab Intermediate Term Treasury and JPMorgan Inflation Managed 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.