Correlation Between Growth Strategy and Schwab Target
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Schwab Target 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 Growth Strategy and Schwab Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Strategy Fund and Schwab Target 2060, you can compare the effects of market volatilities on Growth Strategy and Schwab Target 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 Growth Strategy with a short position of Schwab Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Schwab Target.
Diversification Opportunities for Growth Strategy and Schwab Target
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GROWTH and Schwab is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Schwab Target 2060 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Target 2060 and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Schwab Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Target 2060 has no effect on the direction of Growth Strategy i.e., Growth Strategy and Schwab Target go up and down completely randomly.
Pair Corralation between Growth Strategy and Schwab Target
Assuming the 90 days horizon Growth Strategy is expected to generate 1.17 times less return on investment than Schwab Target. But when comparing it to its historical volatility, Growth Strategy Fund is 1.2 times less risky than Schwab Target. It trades about 0.13 of its potential returns per unit of risk. Schwab Target 2060 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,270 in Schwab Target 2060 on September 4, 2024 and sell it today you would earn a total of 387.00 from holding Schwab Target 2060 or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. Schwab Target 2060
Performance |
| Timeline |
| Growth Strategy |
| Schwab Target 2060 |
Growth Strategy and Schwab Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Schwab Target
The main advantage of trading using opposite Growth Strategy and Schwab Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Schwab Target 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 Target will offset losses from the drop in Schwab Target's long position.| Growth Strategy vs. International Developed Markets | Growth Strategy vs. Global Real Estate | Growth Strategy vs. Global Real Estate | Growth Strategy vs. Global Real Estate |
| Schwab Target vs. Mid Cap Growth | Schwab Target vs. Small Pany Growth | Schwab Target vs. Pace Smallmedium Growth | Schwab Target vs. Smallcap Growth Fund |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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