Correlation Between Schwab REIT and Headwater Gold

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

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

Diversification Opportunities for Schwab REIT and Headwater Gold

0.07

Correlation Coefficient

Schwab REIT  Headwater Gold

Significant diversification

The 3 months correlation between Schwab and Headwater is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Schwab REIT ETF and Headwater Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Gold and Schwab REIT 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 REIT ETF are associated (or correlated) with Headwater Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Gold has no effect on the direction of Schwab REIT i.e., Schwab REIT and Headwater Gold go up and down completely randomly.

Pair Corralation between Schwab REIT and Headwater Gold

Given the investment horizon of 90 days Schwab REIT ETF is expected to under-perform the Headwater Gold. But the etf apears to be less risky and, when comparing its historical volatility, Schwab REIT ETF is 4.99 times less risky than Headwater Gold. The etf trades about -0.03 of its potential returns per unit of risk. The Headwater Gold is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Headwater Gold on March 3, 2025 and sell it today you would earn a total of  8.00  from holding Headwater Gold or generate 66.67% return on investment over 90 days.

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

Schwab REIT ETF  vs.  Headwater Gold

Schwab REIT ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab REIT ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Schwab REIT is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Headwater Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Headwater Gold are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Headwater Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schwab REIT and Headwater Gold

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

The idea behind Schwab REIT ETF and Headwater Gold 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.