Correlation Between Schwab Government and Pace International

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

By analyzing existing cross correlation between Schwab Government Money and Pace International Equity, you can compare the effects of market volatilities on Schwab Government and Pace International 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 Government with a short position of Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Government and Pace International.

Diversification Opportunities for Schwab Government and Pace International

-0.78

Correlation Coefficient

Schwab Government  Pace International

Pay attention - limited upside

The 3 months correlation between Schwab and Pace is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Government Money and Pace International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International Equity and Schwab Government 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 Government Money are associated (or correlated) with Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International Equity has no effect on the direction of Schwab Government i.e., Schwab Government and Pace International go up and down completely randomly.

Pair Corralation between Schwab Government and Pace International

Assuming the 90 days horizon Schwab Government is expected to generate 2.18 times less return on investment than Pace International. But when comparing it to its historical volatility, Schwab Government Money is 5.26 times less risky than Pace International. It trades about 0.13 of its potential returns per unit of risk. Pace International Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,578  in Pace International Equity on September 25, 2024 and sell it today you would earn a total of  252.00  from holding Pace International Equity or generate 15.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.52%
Values	Daily Returns

Schwab Government Money  vs.  Pace International Equity

Schwab Government Money

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Government Money are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pace International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schwab Government and Pace International

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

The idea behind Schwab Government Money and Pace International Equity 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.