Correlation Between Schwab Treasury and Fidelity Managed

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

By analyzing existing cross correlation between Schwab Treasury Inflation and Fidelity Managed Retirement, you can compare the effects of market volatilities on Schwab Treasury and Fidelity Managed 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 Treasury with a short position of Fidelity Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Treasury and Fidelity Managed.

Diversification Opportunities for Schwab Treasury and Fidelity Managed

0.83

Correlation Coefficient

Schwab Treasury  Fidelity Managed

Very poor diversification

The 3 months correlation between Schwab and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Fidelity Managed Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Managed Ret and Schwab Treasury 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 Treasury Inflation are associated (or correlated) with Fidelity Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Managed Ret has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Fidelity Managed go up and down completely randomly.

Pair Corralation between Schwab Treasury and Fidelity Managed

Assuming the 90 days horizon Schwab Treasury Inflation is expected to generate 0.76 times more return on investment than Fidelity Managed. However, Schwab Treasury Inflation is 1.31 times less risky than Fidelity Managed. It trades about 0.22 of its potential returns per unit of risk. Fidelity Managed Retirement is currently generating about 0.09 per unit of risk. If you would invest  1,008  in Schwab Treasury Inflation on December 29, 2024 and sell it today you would earn a total of  37.00  from holding Schwab Treasury Inflation or generate 3.67% return on investment over 90 days.

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

Schwab Treasury Inflation  vs.  Fidelity Managed Retirement

Schwab Treasury Inflation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Treasury Inflation are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Managed Ret

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Managed Retirement are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Managed 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 Treasury and Fidelity Managed

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

The idea behind Schwab Treasury Inflation and Fidelity Managed Retirement 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.