Correlation Between IShares TIPS and Schwab TIPS
Can any of the company-specific risk be diversified away by investing in both IShares TIPS and Schwab TIPS 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 IShares TIPS and Schwab TIPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares TIPS Bond and Schwab TIPS ETF, you can compare the effects of market volatilities on IShares TIPS and Schwab TIPS 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 IShares TIPS with a short position of Schwab TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares TIPS and Schwab TIPS.
Diversification Opportunities for IShares TIPS and Schwab TIPS
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Schwab is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares TIPS Bond and Schwab TIPS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab TIPS ETF and IShares TIPS 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 iShares TIPS Bond are associated (or correlated) with Schwab TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab TIPS ETF has no effect on the direction of IShares TIPS i.e., IShares TIPS and Schwab TIPS go up and down completely randomly.
Pair Corralation between IShares TIPS and Schwab TIPS
Considering the 90-day investment horizon IShares TIPS is expected to generate 1.19 times less return on investment than Schwab TIPS. In addition to that, IShares TIPS is 1.0 times more volatile than Schwab TIPS ETF. It trades about 0.03 of its total potential returns per unit of risk. Schwab TIPS ETF is currently generating about 0.04 per unit of volatility. If you would invest 2,598 in Schwab TIPS ETF on November 1, 2024 and sell it today you would earn a total of 15.00 from holding Schwab TIPS ETF or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares TIPS Bond vs. Schwab TIPS ETF
Performance |
| Timeline |
| iShares TIPS Bond |
| Schwab TIPS ETF |
IShares TIPS and Schwab TIPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares TIPS and Schwab TIPS
The main advantage of trading using opposite IShares TIPS and Schwab TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares TIPS position performs unexpectedly, Schwab TIPS 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 Schwab TIPS will offset losses from the drop in Schwab TIPS's long position.| IShares TIPS vs. iShares iBoxx Investment | IShares TIPS vs. iShares 1 3 Year | IShares TIPS vs. iShares 7 10 Year | IShares TIPS vs. iShares Core Aggregate |
| Schwab TIPS vs. Schwab Intermediate Term Treasury | Schwab TIPS vs. Schwab Aggregate Bond | Schwab TIPS vs. Schwab International Equity | Schwab TIPS vs. Schwab Emerging Markets |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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