Correlation Between Short-term Investment and Schwab Value

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

By analyzing existing cross correlation between Short Term Investment Trust and Schwab Value Advantage, you can compare the effects of market volatilities on Short-term Investment and Schwab Value 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 Short-term Investment with a short position of Schwab Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Investment and Schwab Value.

Diversification Opportunities for Short-term Investment and Schwab Value

0.0

Correlation Coefficient

Short-term Investment  Schwab Value

Pay attention - limited upside

The 3 months correlation between Short-term and Schwab is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Investment Trust and Schwab Value Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Value Advantage and Short-term Investment 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 Short Term Investment Trust are associated (or correlated) with Schwab Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Value Advantage has no effect on the direction of Short-term Investment i.e., Short-term Investment and Schwab Value go up and down completely randomly.

Pair Corralation between Short-term Investment and Schwab Value

Assuming the 90 days horizon Short Term Investment Trust is expected to generate 0.58 times more return on investment than Schwab Value. However, Short Term Investment Trust is 1.73 times less risky than Schwab Value. It trades about 0.13 of its potential returns per unit of risk. Schwab Value Advantage is currently generating about 0.07 per unit of risk. If you would invest  96.00  in Short Term Investment Trust on October 9, 2024 and sell it today you would earn a total of  4.00  from holding Short Term Investment Trust or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.01%
Values	Daily Returns

Short Term Investment Trust  vs.  Schwab Value Advantage

Short Term Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Term Investment Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short-term Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab Value Advantage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Value Advantage 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 Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short-term Investment and Schwab Value

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

The idea behind Short Term Investment Trust and Schwab Value Advantage 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.