Correlation Between Schwab California and Ginnie Mae
Can any of the company-specific risk be diversified away by investing in both Schwab California and Ginnie Mae 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 California and Ginnie Mae into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab California Tax Free and Ginnie Mae Fund, you can compare the effects of market volatilities on Schwab California and Ginnie Mae 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 California with a short position of Ginnie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab California and Ginnie Mae.
Diversification Opportunities for Schwab California and Ginnie Mae
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Schwab and Ginnie is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Schwab California Tax Free and Ginnie Mae Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ginnie Mae Fund and Schwab California 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 California Tax Free are associated (or correlated) with Ginnie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ginnie Mae Fund has no effect on the direction of Schwab California i.e., Schwab California and Ginnie Mae go up and down completely randomly.
Pair Corralation between Schwab California and Ginnie Mae
Assuming the 90 days horizon Schwab California is expected to generate 1.26 times less return on investment than Ginnie Mae. But when comparing it to its historical volatility, Schwab California Tax Free is 1.43 times less risky than Ginnie Mae. It trades about 0.14 of its potential returns per unit of risk. Ginnie Mae Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 883.00 in Ginnie Mae Fund on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Ginnie Mae Fund or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab California Tax Free vs. Ginnie Mae Fund
Performance |
| Timeline |
| Schwab California Tax |
| Ginnie Mae Fund |
Schwab California and Ginnie Mae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab California and Ginnie Mae
The main advantage of trading using opposite Schwab California and Ginnie Mae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab California position performs unexpectedly, Ginnie Mae 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 Ginnie Mae will offset losses from the drop in Ginnie Mae's long position.| Schwab California vs. Fidelity Small Cap | Schwab California vs. Ultramid Cap Profund Ultramid Cap | Schwab California vs. Victory Rs Partners | Schwab California vs. Heartland Value Plus |
| Ginnie Mae vs. Inflation Adjusted Bond Fund | Ginnie Mae vs. Short Term Government Fund | Ginnie Mae vs. Diversified Bond Fund | Ginnie Mae vs. Balanced Fund Investor |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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