Correlation Between Charles Schwab and Federal Natl
Can any of the company-specific risk be diversified away by investing in both Charles Schwab and Federal Natl 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 Charles Schwab and Federal Natl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charles Schwab Corp and Federal Natl Mtg, you can compare the effects of market volatilities on Charles Schwab and Federal Natl 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 Charles Schwab with a short position of Federal Natl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles Schwab and Federal Natl.
Diversification Opportunities for Charles Schwab and Federal Natl
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Charles and Federal is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Charles Schwab Corp and Federal Natl Mtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Natl Mtg and Charles Schwab 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 Charles Schwab Corp are associated (or correlated) with Federal Natl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Natl Mtg has no effect on the direction of Charles Schwab i.e., Charles Schwab and Federal Natl go up and down completely randomly.
Pair Corralation between Charles Schwab and Federal Natl
Given the investment horizon of 90 days Charles Schwab is expected to generate 5.59 times less return on investment than Federal Natl. But when comparing it to its historical volatility, Charles Schwab Corp is 7.21 times less risky than Federal Natl. It trades about 0.39 of its potential returns per unit of risk. Federal Natl Mtg is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 375.00 in Federal Natl Mtg on September 1, 2024 and sell it today you would earn a total of 480.00 from holding Federal Natl Mtg or generate 128.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Charles Schwab Corp vs. Federal Natl Mtg
Performance |
| Timeline |
| Charles Schwab Corp |
| Federal Natl Mtg |
Charles Schwab and Federal Natl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charles Schwab and Federal Natl
The main advantage of trading using opposite Charles Schwab and Federal Natl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Schwab position performs unexpectedly, Federal Natl 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 Federal Natl will offset losses from the drop in Federal Natl's long position.| Charles Schwab vs. Goldman Sachs Group | Charles Schwab vs. Riot Blockchain | Charles Schwab vs. Jefferies Financial Group | Charles Schwab vs. Marathon Digital Holdings |
| Federal Natl vs. Federal National Mortgage | Federal Natl vs. Federal Home Loan | Federal Natl vs. Federal National Mortgage | Federal Natl vs. Federal National Mortgage |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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