Correlation Between Charles Schwab and Tradeweb Markets

Can any of the company-specific risk be diversified away by investing in both Charles Schwab and Tradeweb 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 Tradeweb 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 Tradeweb Markets, you can compare the effects of market volatilities on Charles Schwab and Tradeweb 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 Tradeweb Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles Schwab and Tradeweb Markets.

Diversification Opportunities for Charles Schwab and Tradeweb Markets

-0.32

Correlation Coefficient

Charles Schwab  Tradeweb Markets

Very good diversification

The 3 months correlation between Charles and Tradeweb is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Charles Schwab and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb 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 Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of Charles Schwab i.e., Charles Schwab and Tradeweb Markets go up and down completely randomly.

Pair Corralation between Charles Schwab and Tradeweb Markets

Assuming the 90 days trading horizon The Charles Schwab is expected to under-perform the Tradeweb Markets. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Charles Schwab is 1.59 times less risky than Tradeweb Markets. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Tradeweb Markets is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11,680  in Tradeweb Markets on September 4, 2024 and sell it today you would earn a total of  1,750  from holding Tradeweb Markets or generate 14.98% return on investment over 90 days.

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

The Charles Schwab  vs.  Tradeweb 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. Even with relatively steady forward-looking indicators, Charles Schwab is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Tradeweb Markets

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charles Schwab and Tradeweb Markets

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

The idea behind The Charles Schwab and Tradeweb 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.