Correlation Between Charles Schwab and Robinhood Markets

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

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

Diversification Opportunities for Charles Schwab and Robinhood Markets

0.52

Correlation Coefficient

Charles Schwab  Robinhood Markets

Very weak diversification

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

Pair Corralation between Charles Schwab and Robinhood Markets

Assuming the 90 days trading horizon Charles Schwab is expected to generate 587.35 times less return on investment than Robinhood Markets. But when comparing it to its historical volatility, The Charles Schwab is 14.17 times less risky than Robinhood Markets. It trades about 0.01 of its potential returns per unit of risk. Robinhood Markets is currently generating about 0.23 of returns per unit of risk over similar time horizon. 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

The Charles Schwab  vs.  Robinhood Markets

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.

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.

Pair Trading with Charles Schwab and Robinhood Markets

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

The idea behind The Charles Schwab and Robinhood Markets 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.