Correlation Between First Trust and Schwab Strategic
Can any of the company-specific risk be diversified away by investing in both First Trust and Schwab Strategic 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 First Trust and Schwab Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SkyBridge and Schwab Strategic Trust, you can compare the effects of market volatilities on First Trust and Schwab Strategic 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 First Trust with a short position of Schwab Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Schwab Strategic.
Diversification Opportunities for First Trust and Schwab Strategic
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Schwab is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge and Schwab Strategic Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Strategic Trust and First Trust 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 First Trust SkyBridge are associated (or correlated) with Schwab Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Strategic Trust has no effect on the direction of First Trust i.e., First Trust and Schwab Strategic go up and down completely randomly.
Pair Corralation between First Trust and Schwab Strategic
Given the investment horizon of 90 days First Trust SkyBridge is expected to under-perform the Schwab Strategic. But the etf apears to be less risky and, when comparing its historical volatility, First Trust SkyBridge is 1.22 times less risky than Schwab Strategic. The etf trades about -0.15 of its potential returns per unit of risk. The Schwab Strategic Trust is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 5,138 in Schwab Strategic Trust on November 18, 2024 and sell it today you would lose (179.00) from holding Schwab Strategic Trust or give up 3.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SkyBridge vs. Schwab Strategic Trust
Performance |
| Timeline |
| First Trust SkyBridge |
| Schwab Strategic Trust |
First Trust and Schwab Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Schwab Strategic
The main advantage of trading using opposite First Trust and Schwab Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Schwab Strategic 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 Strategic will offset losses from the drop in Schwab Strategic's long position.| First Trust vs. VanEck Digital Transformation | First Trust vs. Bitwise Crypto Industry | First Trust vs. Global X Blockchain | First Trust vs. First Trust Indxx |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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