Correlation Between Schwab Target and Blackrock Equity

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

By analyzing existing cross correlation between Schwab Target 2040 and Blackrock Equity Dividend, you can compare the effects of market volatilities on Schwab Target and Blackrock Equity 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 Target with a short position of Blackrock Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Target and Blackrock Equity.

Diversification Opportunities for Schwab Target and Blackrock Equity

0.9

Correlation Coefficient

Schwab Target  Blackrock Equity

Almost no diversification

The 3 months correlation between Schwab and Blackrock is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Target 2040 and Blackrock Equity Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Equity Dividend and Schwab Target 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 Target 2040 are associated (or correlated) with Blackrock Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Equity Dividend has no effect on the direction of Schwab Target i.e., Schwab Target and Blackrock Equity go up and down completely randomly.

Pair Corralation between Schwab Target and Blackrock Equity

Assuming the 90 days horizon Schwab Target 2040 is expected to generate 0.91 times more return on investment than Blackrock Equity. However, Schwab Target 2040 is 1.1 times less risky than Blackrock Equity. It trades about 0.21 of its potential returns per unit of risk. Blackrock Equity Dividend is currently generating about 0.17 per unit of risk. If you would invest  1,703  in Schwab Target 2040 on August 12, 2024 and sell it today you would earn a total of  132.00  from holding Schwab Target 2040 or generate 7.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Schwab Target 2040  vs.  Blackrock Equity Dividend

Schwab Target 2040

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Target 2040 are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Schwab Target may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Blackrock Equity Dividend

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Equity Dividend are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Schwab Target and Blackrock Equity

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

The idea behind Schwab Target 2040 and Blackrock Equity Dividend 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 Global Correlations module to find global opportunities by holding instruments from different markets.