Correlation Between Schwab Treasury and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Schwab Treasury and Vanguard Extended 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 Vanguard Extended 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 Vanguard Extended Market, you can compare the effects of market volatilities on Schwab Treasury and Vanguard Extended 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 Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Treasury and Vanguard Extended.
Diversification Opportunities for Schwab Treasury and Vanguard Extended
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Schwab and Vanguard is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market 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 Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Vanguard Extended go up and down completely randomly.
Pair Corralation between Schwab Treasury and Vanguard Extended
Assuming the 90 days horizon Schwab Treasury Inflation is expected to under-perform the Vanguard Extended. But the mutual fund apears to be less risky and, when comparing its historical volatility, Schwab Treasury Inflation is 5.82 times less risky than Vanguard Extended. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Vanguard Extended Market is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 34,752 in Vanguard Extended Market on August 28, 2024 and sell it today you would earn a total of 3,802 from holding Vanguard Extended Market or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Treasury Inflation vs. Vanguard Extended Market
Performance |
| Timeline |
| Schwab Treasury Inflation |
| Vanguard Extended Market |
Schwab Treasury and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Treasury and Vanguard Extended
The main advantage of trading using opposite Schwab Treasury and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Treasury position performs unexpectedly, Vanguard Extended 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 Vanguard Extended will offset losses from the drop in Vanguard Extended's long position.| Schwab Treasury vs. Chartwell Short Duration | Schwab Treasury vs. Rationalpier 88 Convertible | Schwab Treasury vs. Limited Term Tax | Schwab Treasury vs. Fundvantage Trust |
| Vanguard Extended vs. Vanguard Small Cap Index | Vanguard Extended vs. Vanguard 500 Index | Vanguard Extended vs. Vanguard Growth Index | Vanguard Extended vs. Vanguard Total International |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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