Correlation Between Schwab Target and Virtus Real

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

By analyzing existing cross correlation between Schwab Target 2055 and Virtus Real Estate, you can compare the effects of market volatilities on Schwab Target and Virtus Real 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 Target with a short position of Virtus Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Target and Virtus Real.

Diversification Opportunities for Schwab Target and Virtus Real

0.48

Correlation Coefficient

Schwab Target  Virtus Real

Very weak diversification

The 3 months correlation between Schwab and Virtus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Target 2055 and Virtus Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Real Estate and Schwab Target 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 Target 2055 are associated (or correlated) with Virtus Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Real Estate has no effect on the direction of Schwab Target i.e., Schwab Target and Virtus Real go up and down completely randomly.

Pair Corralation between Schwab Target and Virtus Real

Assuming the 90 days horizon Schwab Target 2055 is expected to generate 0.68 times more return on investment than Virtus Real. However, Schwab Target 2055 is 1.47 times less risky than Virtus Real. It trades about 0.15 of its potential returns per unit of risk. Virtus Real Estate is currently generating about 0.07 per unit of risk. If you would invest  1,739  in Schwab Target 2055 on September 4, 2024 and sell it today you would earn a total of  99.00  from holding Schwab Target 2055 or generate 5.69% return on investment over 90 days.

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

Schwab Target 2055  vs.  Virtus Real Estate

Schwab Target 2055

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Target 2055 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Real Estate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Real Estate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Real 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 Target and Virtus Real

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

The idea behind Schwab Target 2055 and Virtus Real Estate 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.