Correlation Between SPDR Barclays and Schwab Intermediate
Can any of the company-specific risk be diversified away by investing in both SPDR Barclays 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 SPDR Barclays and Schwab Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Barclays Short and Schwab Intermediate Term Treasury, you can compare the effects of market volatilities on SPDR Barclays 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 SPDR Barclays with a short position of Schwab Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and Schwab Intermediate.
Diversification Opportunities for SPDR Barclays and Schwab Intermediate
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Schwab is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Short 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 SPDR Barclays 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 SPDR Barclays Short 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 SPDR Barclays i.e., SPDR Barclays and Schwab Intermediate go up and down completely randomly.
Pair Corralation between SPDR Barclays and Schwab Intermediate
Given the investment horizon of 90 days SPDR Barclays is expected to generate 1.09 times less return on investment than Schwab Intermediate. But when comparing it to its historical volatility, SPDR Barclays Short is 2.77 times less risky than Schwab Intermediate. It trades about 0.14 of its potential returns per unit of risk. Schwab Intermediate Term Treasury is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,289 in Schwab Intermediate Term Treasury on August 27, 2024 and sell it today you would earn a total of 154.00 from holding Schwab Intermediate Term Treasury or generate 6.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Barclays Short vs. Schwab Intermediate Term Treas
Performance |
| Timeline |
| SPDR Barclays Short |
| Schwab Intermediate |
SPDR Barclays and Schwab Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Barclays and Schwab Intermediate
The main advantage of trading using opposite SPDR Barclays and Schwab Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Barclays 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.The idea behind SPDR Barclays Short and Schwab Intermediate Term Treasury pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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