Correlation Between Schwab Treasury and Short Duration
Can any of the company-specific risk be diversified away by investing in both Schwab Treasury and Short Duration 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 Treasury and Short Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Treasury Inflation and Short Duration Inflation, you can compare the effects of market volatilities on Schwab Treasury and Short Duration 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 Treasury with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Treasury and Short Duration.
Diversification Opportunities for Schwab Treasury and Short Duration
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Schwab and Short is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation and Schwab Treasury 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 Treasury Inflation are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Short Duration go up and down completely randomly.
Pair Corralation between Schwab Treasury and Short Duration
Assuming the 90 days horizon Schwab Treasury is expected to generate 1.04 times less return on investment than Short Duration. In addition to that, Schwab Treasury is 1.84 times more volatile than Short Duration Inflation. It trades about 0.07 of its total potential returns per unit of risk. Short Duration Inflation is currently generating about 0.13 per unit of volatility. If you would invest 994.00 in Short Duration Inflation on August 24, 2024 and sell it today you would earn a total of 57.00 from holding Short Duration Inflation or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Schwab Treasury Inflation vs. Short Duration Inflation
Performance |
| Timeline |
| Schwab Treasury Inflation |
| Short Duration Inflation |
Schwab Treasury and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Treasury and Short Duration
The main advantage of trading using opposite Schwab Treasury and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Treasury position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.The idea behind Schwab Treasury Inflation and Short Duration Inflation 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.
| Short Duration vs. Vanguard Short Term Inflation Protected | Short Duration vs. Vanguard Short Term Inflation Protected | Short Duration vs. T Rowe Price | Short Duration vs. T Rowe Price |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |