Correlation Between Schwab Treasury and Fidelity New

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

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

Diversification Opportunities for Schwab Treasury and Fidelity New

0.74

Correlation Coefficient

Schwab Treasury  Fidelity New

Poor diversification

The 3 months correlation between Schwab and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Fidelity New Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity New Markets and Schwab Treasury 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 Treasury Inflation are associated (or correlated) with Fidelity New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity New Markets has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Fidelity New go up and down completely randomly.

Pair Corralation between Schwab Treasury and Fidelity New

Assuming the 90 days horizon Schwab Treasury Inflation is expected to under-perform the Fidelity New. But the mutual fund apears to be less risky and, when comparing its historical volatility, Schwab Treasury Inflation is 1.13 times less risky than Fidelity New. The mutual fund trades about -0.47 of its potential returns per unit of risk. The Fidelity New Markets is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,287  in Fidelity New Markets on October 1, 2024 and sell it today you would lose (20.00) from holding Fidelity New Markets or give up 1.55% of portfolio value over 90 days.

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

Schwab Treasury Inflation  vs.  Fidelity New Markets

Schwab Treasury Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity New Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity New Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Fidelity New 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 Treasury and Fidelity New

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

The idea behind Schwab Treasury Inflation and Fidelity New 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.