Correlation Between Schwab Large-cap and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Schwab Large-cap and Dow Jones 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 Large-cap and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Large Cap Growth and Dow Jones Industrial, you can compare the effects of market volatilities on Schwab Large-cap and Dow Jones 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 Large-cap with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Large-cap and Dow Jones.
Diversification Opportunities for Schwab Large-cap and Dow Jones
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Schwab and Dow is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Large Cap Growth and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Schwab Large-cap 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 Large Cap Growth are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Schwab Large-cap i.e., Schwab Large-cap and Dow Jones go up and down completely randomly.
Pair Corralation between Schwab Large-cap and Dow Jones
Assuming the 90 days horizon Schwab Large Cap Growth is expected to generate 1.42 times more return on investment than Dow Jones. However, Schwab Large-cap is 1.42 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 2,151 in Schwab Large Cap Growth on August 26, 2024 and sell it today you would earn a total of 1,400 from holding Schwab Large Cap Growth or generate 65.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Large Cap Growth vs. Dow Jones Industrial
Performance |
| Timeline |
Schwab Large-cap and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Schwab Large Cap Growth
Pair trading matchups for Schwab Large-cap
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Schwab Large-cap and Dow Jones
The main advantage of trading using opposite Schwab Large-cap and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Large-cap position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Schwab Large-cap vs. Hennessy Nerstone Mid | Schwab Large-cap vs. Boston Partners Small | Schwab Large-cap vs. Fpa Queens Road | Schwab Large-cap vs. Ultrasmall Cap Profund Ultrasmall Cap |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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