Correlation Between Schwab Treasury and Laudus Large

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

Diversification Opportunities for Schwab Treasury and Laudus Large

-0.13

Correlation Coefficient

Schwab Treasury  Laudus Large

Good diversification

The 3 months correlation between Schwab and Laudus is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Laudus Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laudus Large Cap 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 Laudus Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laudus Large Cap has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Laudus Large go up and down completely randomly.

Pair Corralation between Schwab Treasury and Laudus Large

Assuming the 90 days horizon Schwab Treasury Inflation is expected to generate 0.14 times more return on investment than Laudus Large. However, Schwab Treasury Inflation is 7.15 times less risky than Laudus Large. It trades about -0.36 of its potential returns per unit of risk. Laudus Large Cap is currently generating about -0.07 per unit of risk. If you would invest  1,028  in Schwab Treasury Inflation on September 28, 2024 and sell it today you would lose (21.00) from holding Schwab Treasury Inflation or give up 2.04% of portfolio value over 90 days.

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

Schwab Treasury Inflation  vs.  Laudus Large Cap

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.

Laudus Large Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laudus Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Laudus Large 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 Laudus Large

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

The idea behind Schwab Treasury Inflation and Laudus Large Cap 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.