Correlation Between Charles Schwab and Sabre Insurance

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

By analyzing existing cross correlation between The Charles Schwab and Sabre Insurance Group, you can compare the effects of market volatilities on Charles Schwab and Sabre Insurance 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 Charles Schwab with a short position of Sabre Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles Schwab and Sabre Insurance.

Diversification Opportunities for Charles Schwab and Sabre Insurance

-0.64

Correlation Coefficient

Charles Schwab  Sabre Insurance

Excellent diversification

The 3 months correlation between Charles and Sabre is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Charles Schwab and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group and Charles Schwab 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 The Charles Schwab are associated (or correlated) with Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Charles Schwab i.e., Charles Schwab and Sabre Insurance go up and down completely randomly.

Pair Corralation between Charles Schwab and Sabre Insurance

Assuming the 90 days horizon The Charles Schwab is expected to generate 0.88 times more return on investment than Sabre Insurance. However, The Charles Schwab is 1.13 times less risky than Sabre Insurance. It trades about 0.05 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.02 per unit of risk. If you would invest  5,698  in The Charles Schwab on September 27, 2024 and sell it today you would earn a total of  1,416  from holding The Charles Schwab or generate 24.85% return on investment over 90 days.

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

The Charles Schwab  vs.  Sabre Insurance Group

Charles Schwab

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Charles Schwab reported solid returns over the last few months and may actually be approaching a breakup point.

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Charles Schwab and Sabre Insurance

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

The idea behind The Charles Schwab and Sabre Insurance Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.