Correlation Between Schwab Long and IShares 25

Can any of the company-specific risk be diversified away by investing in both Schwab Long and IShares 25 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 Long and IShares 25 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schwab Long Term Treasury and iShares 25 Year, you can compare the effects of market volatilities on Schwab Long and IShares 25 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 Long with a short position of IShares 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Long and IShares 25.

Diversification Opportunities for Schwab Long and IShares 25

1.0

Correlation Coefficient

Schwab Long  IShares 25

No risk reduction

The 3 months correlation between Schwab and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Long Term Treasury and iShares 25 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 25 Year and Schwab Long 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 Long Term Treasury are associated (or correlated) with IShares 25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 25 Year has no effect on the direction of Schwab Long i.e., Schwab Long and IShares 25 go up and down completely randomly.

Pair Corralation between Schwab Long and IShares 25

Given the investment horizon of 90 days Schwab Long Term Treasury is expected to generate 0.56 times more return on investment than IShares 25. However, Schwab Long Term Treasury is 1.8 times less risky than IShares 25. It trades about -0.04 of its potential returns per unit of risk. iShares 25 Year is currently generating about -0.04 per unit of risk. If you would invest  3,407  in Schwab Long Term Treasury on August 30, 2024 and sell it today you would lose (81.00) from holding Schwab Long Term Treasury or give up 2.38% of portfolio value over 90 days.

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

Schwab Long Term Treasury  vs.  iShares 25 Year

Schwab Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Long Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Schwab Long is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

iShares 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares 25 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schwab Long and IShares 25

The main advantage of trading using opposite Schwab Long and IShares 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Long position performs unexpectedly, IShares 25 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 IShares 25 will offset losses from the drop in IShares 25's long position.

The idea behind Schwab Long Term Treasury and iShares 25 Year 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.