Correlation Between Schwab Government and Eaton Vance

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

By analyzing existing cross correlation between Schwab Government Money and Eaton Vance Income, you can compare the effects of market volatilities on Schwab Government and Eaton Vance 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 Government with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Government and Eaton Vance.

Diversification Opportunities for Schwab Government and Eaton Vance

0.56

Correlation Coefficient

Schwab Government  Eaton Vance

Very weak diversification

The 3 months correlation between Schwab and Eaton is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Government Money and Eaton Vance Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Income and Schwab Government 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 Government Money are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Income has no effect on the direction of Schwab Government i.e., Schwab Government and Eaton Vance go up and down completely randomly.

Pair Corralation between Schwab Government and Eaton Vance

Assuming the 90 days horizon Schwab Government is expected to generate 1.36 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, Schwab Government Money is 1.42 times less risky than Eaton Vance. It trades about 0.13 of its potential returns per unit of risk. Eaton Vance Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  512.00  in Eaton Vance Income on December 20, 2024 and sell it today you would earn a total of  7.00  from holding Eaton Vance Income or generate 1.37% return on investment over 90 days.

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

Schwab Government Money  vs.  Eaton Vance Income

Schwab Government Money

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Government Money are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Eaton Vance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schwab Government and Eaton Vance

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

The idea behind Schwab Government Money and Eaton Vance Income 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.