Correlation Between Schwab Long and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Schwab Long and Dow Jones 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 Long and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Long Term Treasury and Dow Jones Industrial, you can compare the effects of market volatilities on Schwab Long and Dow Jones 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 Long with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Long and Dow Jones.
Diversification Opportunities for Schwab Long and Dow Jones
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Schwab and Dow is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Long Term Treasury and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Schwab Long 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 Long Term Treasury are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Schwab Long i.e., Schwab Long and Dow Jones go up and down completely randomly.
Pair Corralation between Schwab Long and Dow Jones
Given the investment horizon of 90 days Schwab Long Term Treasury is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, Schwab Long Term Treasury is 1.21 times less risky than Dow Jones. The etf trades about -0.09 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,284,026 in Dow Jones Industrial on October 21, 2024 and sell it today you would earn a total of 64,757 from holding Dow Jones Industrial or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Schwab Long Term Treasury vs. Dow Jones Industrial
Performance |
| Timeline |
Schwab Long and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Schwab Long Term Treasury
Pair trading matchups for Schwab Long
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Schwab Long and Dow Jones
The main advantage of trading using opposite Schwab Long and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Long position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Schwab Long vs. Schwab 1 5 Year | Schwab Long vs. Schwab 5 10 Year | Schwab Long vs. Schwab Intermediate Term Treasury | Schwab Long vs. Schwab Short Term Treasury |
| Dow Jones vs. Ainsworth Game Technology | Dow Jones vs. The Coca Cola | Dow Jones vs. Galaxy Gaming | Dow Jones vs. Playtika Holding Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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