Correlation Between Schwab Strategic and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Schwab Strategic and Northern Lights 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 Strategic and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Strategic Trust and Northern Lights, you can compare the effects of market volatilities on Schwab Strategic and Northern Lights 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 Strategic with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Strategic and Northern Lights.
Diversification Opportunities for Schwab Strategic and Northern Lights
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Schwab and Northern is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Strategic Trust and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Schwab Strategic 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 Strategic Trust are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Schwab Strategic i.e., Schwab Strategic and Northern Lights go up and down completely randomly.
Pair Corralation between Schwab Strategic and Northern Lights
Given the investment horizon of 90 days Schwab Strategic Trust is expected to generate 6.5 times more return on investment than Northern Lights. However, Schwab Strategic is 6.5 times more volatile than Northern Lights. It trades about 0.22 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 3,511 in Schwab Strategic Trust on August 30, 2024 and sell it today you would earn a total of 1,747 from holding Schwab Strategic Trust or generate 49.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Strategic Trust vs. Northern Lights
Performance |
| Timeline |
| Schwab Strategic Trust |
| Northern Lights |
Schwab Strategic and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Strategic and Northern Lights
The main advantage of trading using opposite Schwab Strategic and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Strategic position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Schwab Strategic vs. Inpex Corp ADR | Schwab Strategic vs. Managed Account Series | Schwab Strategic vs. Fidelity Sai International | Schwab Strategic vs. Daikin IndustriesLtd |
| Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China | Northern Lights vs. Tidal Trust II |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |