Correlation Between Schwab 1000 and Investment

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Can any of the company-specific risk be diversified away by investing in both Schwab 1000 and Investment 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 1000 and Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab 1000 Index and Investment Of America, you can compare the effects of market volatilities on Schwab 1000 and Investment 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 1000 with a short position of Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab 1000 and Investment.

Diversification Opportunities for Schwab 1000 and Investment

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Schwab and Investment is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SCHWAB 1000 INDEX and INVESTMENT OF AMERICA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Of America and Schwab 1000 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 1000 Index are associated (or correlated) with Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Of America has no effect on the direction of Schwab 1000 i.e., Schwab 1000 and Investment go up and down completely randomly.

Pair Corralation between Schwab 1000 and Investment

Assuming the 90 days horizon Schwab 1000 is expected to generate 1.09 times less return on investment than Investment. In addition to that, Schwab 1000 is 1.06 times more volatile than Investment Of America. It trades about 0.15 of its total potential returns per unit of risk. Investment Of America is currently generating about 0.17 per unit of volatility. If you would invest  4,140  in Investment Of America on December 30, 2023 and sell it today you would earn a total of  1,406  from holding Investment Of America or generate 33.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.6%
ValuesDaily Returns

SCHWAB 1000 INDEX  vs.  INVESTMENT OF AMERICA

 Performance 
       Timeline  
Schwab 1000 Index 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Schwab 1000 Index are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Schwab 1000 may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Investment Of America 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Investment Of America are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Investment may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Schwab 1000 and Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schwab 1000 and Investment

The main advantage of trading using opposite Schwab 1000 and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab 1000 position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.
The idea behind Schwab 1000 Index and Investment Of America 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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