Correlation Between American Funds and Schwab Treasury
Can any of the company-specific risk be diversified away by investing in both American Funds and Schwab Treasury 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 American Funds and Schwab Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Schwab Treasury Inflation, you can compare the effects of market volatilities on American Funds and Schwab Treasury 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 American Funds with a short position of Schwab Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Schwab Treasury.
Diversification Opportunities for American Funds and Schwab Treasury
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Schwab is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Schwab Treasury Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Treasury Inflation and American Funds 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 American Funds Inflation are associated (or correlated) with Schwab Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Treasury Inflation has no effect on the direction of American Funds i.e., American Funds and Schwab Treasury go up and down completely randomly.
Pair Corralation between American Funds and Schwab Treasury
Assuming the 90 days horizon American Funds is expected to generate 1.02 times less return on investment than Schwab Treasury. But when comparing it to its historical volatility, American Funds Inflation is 1.02 times less risky than Schwab Treasury. It trades about 0.25 of its potential returns per unit of risk. Schwab Treasury Inflation is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,021 in Schwab Treasury Inflation on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Schwab Treasury Inflation or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Schwab Treasury Inflation
Performance |
| Timeline |
| American Funds Inflation |
| Schwab Treasury Inflation |
American Funds and Schwab Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Schwab Treasury
The main advantage of trading using opposite American Funds and Schwab Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Schwab Treasury 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 Schwab Treasury will offset losses from the drop in Schwab Treasury's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Schwab Treasury vs. Ab Global Risk | Schwab Treasury vs. Siit High Yield | Schwab Treasury vs. Metropolitan West High | Schwab Treasury vs. Calvert High Yield |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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