Correlation Between Schwab Target and Pimco International

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

By analyzing existing cross correlation between Schwab Target 2030 and Pimco International Stocksplus, you can compare the effects of market volatilities on Schwab Target and Pimco International 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 Pimco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Target and Pimco International.

Diversification Opportunities for Schwab Target and Pimco International

0.62

Correlation Coefficient

Schwab Target  Pimco International

Poor diversification

The 3 months correlation between Schwab and Pimco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Target 2030 and Pimco International Stocksplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco International 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 2030 are associated (or correlated) with Pimco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco International has no effect on the direction of Schwab Target i.e., Schwab Target and Pimco International go up and down completely randomly.

Pair Corralation between Schwab Target and Pimco International

Assuming the 90 days horizon Schwab Target 2030 is expected to under-perform the Pimco International. In addition to that, Schwab Target is 1.36 times more volatile than Pimco International Stocksplus. It trades about -0.26 of its total potential returns per unit of risk. Pimco International Stocksplus is currently generating about -0.22 per unit of volatility. If you would invest  871.00  in Pimco International Stocksplus on October 7, 2024 and sell it today you would lose (27.00) from holding Pimco International Stocksplus or give up 3.1% of portfolio value over 90 days.

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

Schwab Target 2030  vs.  Pimco International Stocksplus

Schwab Target 2030

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Target 2030 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Schwab Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco International Stocksplus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Pimco International 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 Pimco International

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

The idea behind Schwab Target 2030 and Pimco International Stocksplus 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.