Correlation Between Robinhood Markets and Charles Schwab

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

By analyzing existing cross correlation between Robinhood Markets and The Charles Schwab, you can compare the effects of market volatilities on Robinhood Markets and Charles Schwab 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 Robinhood Markets with a short position of Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Robinhood Markets and Charles Schwab.

Diversification Opportunities for Robinhood Markets and Charles Schwab

0.52

Correlation Coefficient

Robinhood Markets  Charles Schwab

Very weak diversification

The 3 months correlation between Robinhood and Charles is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Robinhood Markets and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab and Robinhood Markets 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 Robinhood Markets are associated (or correlated) with Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Robinhood Markets i.e., Robinhood Markets and Charles Schwab go up and down completely randomly.

Pair Corralation between Robinhood Markets and Charles Schwab

Given the investment horizon of 90 days Robinhood Markets is expected to generate 14.17 times more return on investment than Charles Schwab. However, Robinhood Markets is 14.17 times more volatile than The Charles Schwab. It trades about 0.23 of its potential returns per unit of risk. The Charles Schwab is currently generating about 0.01 per unit of risk. If you would invest  2,207  in Robinhood Markets on September 13, 2024 and sell it today you would earn a total of  1,718  from holding Robinhood Markets or generate 77.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Robinhood Markets  vs.  The Charles Schwab

Robinhood Markets

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Robinhood Markets are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Robinhood Markets exhibited solid returns over the last few months and may actually be approaching a breakup point.

Charles Schwab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Charles Schwab has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Charles Schwab is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Robinhood Markets and Charles Schwab

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

The idea behind Robinhood Markets and The Charles Schwab 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.