Correlation Between Moodys and Charles Schwab

Can any of the company-specific risk be diversified away by investing in both Moodys and Charles Schwab 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 Moodys and Charles Schwab into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Moodys and Charles Schwab Corp, you can compare the effects of market volatilities on Moodys and Charles Schwab 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 Moodys with a short position of Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moodys and Charles Schwab.

Diversification Opportunities for Moodys and Charles Schwab

-0.26

Correlation Coefficient

Moodys  Charles Schwab

Very good diversification

The 3 months correlation between Moodys and Charles is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Moodys and Charles Schwab Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab Corp and Moodys 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 Moodys are associated (or correlated) with Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab Corp has no effect on the direction of Moodys i.e., Moodys and Charles Schwab go up and down completely randomly.

Pair Corralation between Moodys and Charles Schwab

Considering the 90-day investment horizon Moodys is expected to under-perform the Charles Schwab. In addition to that, Moodys is 1.13 times more volatile than Charles Schwab Corp. It trades about -0.12 of its total potential returns per unit of risk. Charles Schwab Corp is currently generating about 0.28 per unit of volatility. If you would invest  7,142  in Charles Schwab Corp on February 3, 2024 and sell it today you would earn a total of  463.00  from holding Charles Schwab Corp or generate 6.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Moodys  vs.  Charles Schwab Corp

Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Charles Schwab Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moodys and Charles Schwab

The main advantage of trading using opposite Moodys and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moodys position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.

The idea behind Moodys and Charles Schwab Corp 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.