Correlation Between Schwab Intermediate and Schwab 1

Can any of the company-specific risk be diversified away by investing in both Schwab Intermediate and Schwab 1 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 Schwab 1 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 Schwab 1 5 Year, you can compare the effects of market volatilities on Schwab Intermediate and Schwab 1 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 Schwab 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Intermediate and Schwab 1.

Diversification Opportunities for Schwab Intermediate and Schwab 1

0.69

Correlation Coefficient

Schwab Intermediate  Schwab 1

Poor diversification

The 3 months correlation between Schwab and Schwab is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Intermediate Term Treas and Schwab 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab 1 5 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 Schwab 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab 1 5 has no effect on the direction of Schwab Intermediate i.e., Schwab Intermediate and Schwab 1 go up and down completely randomly.

Pair Corralation between Schwab Intermediate and Schwab 1

Given the investment horizon of 90 days Schwab Intermediate Term Treasury is expected to under-perform the Schwab 1. In addition to that, Schwab Intermediate is 1.67 times more volatile than Schwab 1 5 Year. It trades about -0.34 of its total potential returns per unit of risk. Schwab 1 5 Year is currently generating about -0.15 per unit of volatility. If you would invest  2,446  in Schwab 1 5 Year on October 9, 2024 and sell it today you would lose (9.00) from holding Schwab 1 5 Year or give up 0.37% of portfolio value over 90 days.

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

Schwab Intermediate Term Treas  vs.  Schwab 1 5 Year

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.

Schwab 1 5

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab 1 5 Year are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical indicators, Schwab 1 is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Schwab Intermediate and Schwab 1

The main advantage of trading using opposite Schwab Intermediate and Schwab 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Intermediate position performs unexpectedly, Schwab 1 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 Schwab 1 will offset losses from the drop in Schwab 1's long position.

The idea behind Schwab Intermediate Term Treasury and Schwab 1 5 Year 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.

Check out your portfolio center.

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.