Correlation Between Associated Capital and Charles Schwab

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

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

Diversification Opportunities for Associated Capital and Charles Schwab

-0.6

Correlation Coefficient

Associated Capital  Charles Schwab

Excellent diversification

The 3 months correlation between Associated and Charles is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group 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 Associated Capital 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 Associated Capital Group 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 Associated Capital i.e., Associated Capital and Charles Schwab go up and down completely randomly.

Pair Corralation between Associated Capital and Charles Schwab

Allowing for the 90-day total investment horizon Associated Capital is expected to generate 9.73 times less return on investment than Charles Schwab. But when comparing it to its historical volatility, Associated Capital Group is 1.49 times less risky than Charles Schwab. It trades about 0.02 of its potential returns per unit of risk. Charles Schwab Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,237  in Charles Schwab Corp on February 1, 2024 and sell it today you would earn a total of  158.00  from holding Charles Schwab Corp or generate 2.18% return on investment over 90 days.

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

Associated Capital Group  vs.  Charles Schwab Corp

Associated Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Charles Schwab Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 20 (%) 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 Associated Capital and Charles Schwab

The main advantage of trading using opposite Associated Capital and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Capital 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 Associated Capital Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.