Correlation Between Schwab Aggregate and Schwab Intermediate
Can any of the company-specific risk be diversified away by investing in both Schwab Aggregate and Schwab Intermediate 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 Aggregate and Schwab Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Aggregate Bond and Schwab Intermediate Term Treasury, you can compare the effects of market volatilities on Schwab Aggregate and Schwab Intermediate 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 Aggregate with a short position of Schwab Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Aggregate and Schwab Intermediate.
Diversification Opportunities for Schwab Aggregate and Schwab Intermediate
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Schwab and Schwab is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Aggregate Bond and Schwab Intermediate Term Treas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Intermediate and Schwab Aggregate 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 Aggregate Bond are associated (or correlated) with Schwab Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Intermediate has no effect on the direction of Schwab Aggregate i.e., Schwab Aggregate and Schwab Intermediate go up and down completely randomly.
Pair Corralation between Schwab Aggregate and Schwab Intermediate
Given the investment horizon of 90 days Schwab Aggregate Bond is expected to generate 1.13 times more return on investment than Schwab Intermediate. However, Schwab Aggregate is 1.13 times more volatile than Schwab Intermediate Term Treasury. It trades about 0.05 of its potential returns per unit of risk. Schwab Intermediate Term Treasury is currently generating about 0.05 per unit of risk. If you would invest 2,084 in Schwab Aggregate Bond on November 1, 2024 and sell it today you would earn a total of 204.00 from holding Schwab Aggregate Bond or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Aggregate Bond vs. Schwab Intermediate Term Treas
Performance |
| Timeline |
| Schwab Aggregate Bond |
| Schwab Intermediate |
Schwab Aggregate and Schwab Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Aggregate and Schwab Intermediate
The main advantage of trading using opposite Schwab Aggregate and Schwab Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Aggregate position performs unexpectedly, Schwab Intermediate 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 Intermediate will offset losses from the drop in Schwab Intermediate's long position.| Schwab Aggregate vs. Schwab International Equity | Schwab Aggregate vs. Schwab Emerging Markets | Schwab Aggregate vs. Schwab Short Term Treasury | Schwab Aggregate vs. Schwab TIPS ETF |
| Schwab Intermediate vs. Schwab Short Term Treasury | Schwab Intermediate vs. Schwab International Small Cap | Schwab Intermediate vs. Schwab TIPS ETF | Schwab Intermediate vs. Schwab Aggregate Bond |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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