Correlation Between Charles Schwab and RTL Group

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

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

Diversification Opportunities for Charles Schwab and RTL Group

-0.87

Correlation Coefficient

Charles Schwab  RTL Group

Pay attention - limited upside

The 3 months correlation between Charles and RTL is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Charles Schwab Corp and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA and Charles Schwab 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 Charles Schwab Corp are associated (or correlated) with RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Charles Schwab i.e., Charles Schwab and RTL Group go up and down completely randomly.

Pair Corralation between Charles Schwab and RTL Group

Given the investment horizon of 90 days Charles Schwab Corp is expected to generate 0.57 times more return on investment than RTL Group. However, Charles Schwab Corp is 1.76 times less risky than RTL Group. It trades about 0.07 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.03 per unit of risk. If you would invest  5,540  in Charles Schwab Corp on August 28, 2024 and sell it today you would earn a total of  2,637  from holding Charles Schwab Corp or generate 47.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	62.15%
Values	Daily Returns

Charles Schwab Corp  vs.  RTL Group SA

Charles Schwab Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 19 (%) 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.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Charles Schwab and RTL Group

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

The idea behind Charles Schwab Corp and RTL Group SA 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.