Correlation Between Schwab REIT and VanEck Mortgage

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

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

Diversification Opportunities for Schwab REIT and VanEck Mortgage

0.79

Correlation Coefficient

Schwab REIT  VanEck Mortgage

Poor diversification

The 3 months correlation between Schwab and VanEck is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Schwab REIT ETF and VanEck Mortgage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Mortgage REIT and Schwab REIT 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 REIT ETF are associated (or correlated) with VanEck Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Mortgage REIT has no effect on the direction of Schwab REIT i.e., Schwab REIT and VanEck Mortgage go up and down completely randomly.

Pair Corralation between Schwab REIT and VanEck Mortgage

Given the investment horizon of 90 days Schwab REIT ETF is expected to under-perform the VanEck Mortgage. In addition to that, Schwab REIT is 1.02 times more volatile than VanEck Mortgage REIT. It trades about -0.15 of its total potential returns per unit of risk. VanEck Mortgage REIT is currently generating about -0.09 per unit of volatility. If you would invest  1,172  in VanEck Mortgage REIT on September 23, 2024 and sell it today you would lose (71.00) from holding VanEck Mortgage REIT or give up 6.06% of portfolio value over 90 days.

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

Schwab REIT ETF  vs.  VanEck Mortgage REIT

Schwab REIT ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab REIT ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

VanEck Mortgage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Mortgage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Mortgage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Schwab REIT and VanEck Mortgage

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

The idea behind Schwab REIT ETF and VanEck Mortgage REIT 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.