Correlation Between Kensington Active and Schwab Treasury
Can any of the company-specific risk be diversified away by investing in both Kensington Active 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 Kensington Active and Schwab Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kensington Active Advantage and Schwab Treasury Inflation, you can compare the effects of market volatilities on Kensington Active 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 Kensington Active with a short position of Schwab Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kensington Active and Schwab Treasury.
Diversification Opportunities for Kensington Active and Schwab Treasury
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kensington and Schwab is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Active Advantage 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 Kensington Active 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 Kensington Active Advantage 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 Kensington Active i.e., Kensington Active and Schwab Treasury go up and down completely randomly.
Pair Corralation between Kensington Active and Schwab Treasury
Assuming the 90 days horizon Kensington Active Advantage is expected to generate 1.6 times more return on investment than Schwab Treasury. However, Kensington Active is 1.6 times more volatile than Schwab Treasury Inflation. It trades about 0.09 of its potential returns per unit of risk. Schwab Treasury Inflation is currently generating about 0.05 per unit of risk. If you would invest 937.00 in Kensington Active Advantage on September 12, 2024 and sell it today you would earn a total of 97.00 from holding Kensington Active Advantage or generate 10.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Kensington Active Advantage vs. Schwab Treasury Inflation
Performance |
| Timeline |
| Kensington Active |
| Schwab Treasury Inflation |
Kensington Active and Schwab Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kensington Active and Schwab Treasury
The main advantage of trading using opposite Kensington Active and Schwab Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kensington Active 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.| Kensington Active vs. Schwab Treasury Inflation | Kensington Active vs. Lord Abbett Inflation | Kensington Active vs. Atac Inflation Rotation | Kensington Active vs. Arrow Managed Futures |
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.
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