Correlation Between Schwab Treasury and Pacific Funds

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Can any of the company-specific risk be diversified away by investing in both Schwab Treasury and Pacific Funds 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 Pacific Funds 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 Pacific Funds Portfolio, you can compare the effects of market volatilities on Schwab Treasury and Pacific Funds 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 Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Treasury and Pacific Funds.

Diversification Opportunities for Schwab Treasury and Pacific Funds

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Schwab and Pacific is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Pacific Funds Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Portfolio 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 Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Portfolio has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Pacific Funds go up and down completely randomly.

Pair Corralation between Schwab Treasury and Pacific Funds

Assuming the 90 days horizon Schwab Treasury is expected to generate 2.81 times less return on investment than Pacific Funds. But when comparing it to its historical volatility, Schwab Treasury Inflation is 1.09 times less risky than Pacific Funds. It trades about 0.04 of its potential returns per unit of risk. Pacific Funds Portfolio is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  889.00  in Pacific Funds Portfolio on September 14, 2024 and sell it today you would earn a total of  203.00  from holding Pacific Funds Portfolio or generate 22.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Schwab Treasury Inflation  vs.  Pacific Funds Portfolio

 Performance 
       Timeline  
Schwab Treasury Inflation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Schwab Treasury Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Schwab Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Pacific Funds Portfolio 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Funds Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pacific Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab Treasury and Pacific Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schwab Treasury and Pacific Funds

The main advantage of trading using opposite Schwab Treasury and Pacific Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Treasury position performs unexpectedly, Pacific Funds 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 Pacific Funds will offset losses from the drop in Pacific Funds' long position.
The idea behind Schwab Treasury Inflation and Pacific Funds Portfolio 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.
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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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