Correlation Between Schwab Short and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Schwab Short and SPDR Portfolio 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 Short and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Short Term Treasury and SPDR Portfolio Aggregate, you can compare the effects of market volatilities on Schwab Short and SPDR Portfolio 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 Short with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Short and SPDR Portfolio.
Diversification Opportunities for Schwab Short and SPDR Portfolio
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Schwab and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Short Term Treasury and SPDR Portfolio Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Aggregate and Schwab Short 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 Short Term Treasury are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Aggregate has no effect on the direction of Schwab Short i.e., Schwab Short and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Schwab Short and SPDR Portfolio
Given the investment horizon of 90 days Schwab Short Term Treasury is expected to generate 0.33 times more return on investment than SPDR Portfolio. However, Schwab Short Term Treasury is 3.08 times less risky than SPDR Portfolio. It trades about 0.06 of its potential returns per unit of risk. SPDR Portfolio Aggregate is currently generating about -0.02 per unit of risk. If you would invest 2,416 in Schwab Short Term Treasury on September 2, 2024 and sell it today you would earn a total of 9.00 from holding Schwab Short Term Treasury or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Short Term Treasury vs. SPDR Portfolio Aggregate
Performance |
| Timeline |
| Schwab Short Term |
| SPDR Portfolio Aggregate |
Schwab Short and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Short and SPDR Portfolio
The main advantage of trading using opposite Schwab Short and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Short position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.| Schwab Short vs. Schwab Intermediate Term Treasury | Schwab Short vs. Schwab Aggregate Bond | Schwab Short vs. Schwab TIPS ETF | Schwab Short vs. Schwab International Small Cap |
| SPDR Portfolio vs. SPDR SP World | SPDR Portfolio vs. SPDR Barclays Intermediate | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio Emerging |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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