Correlation Between Schwab Fundamental and ProShares Russell
Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and ProShares Russell 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 Fundamental and ProShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Fundamental Small and ProShares Russell 2000, you can compare the effects of market volatilities on Schwab Fundamental and ProShares Russell 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 Fundamental with a short position of ProShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and ProShares Russell.
Diversification Opportunities for Schwab Fundamental and ProShares Russell
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Schwab and ProShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Small and ProShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Russell 2000 and Schwab Fundamental 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 Fundamental Small are associated (or correlated) with ProShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Russell 2000 has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and ProShares Russell go up and down completely randomly.
Pair Corralation between Schwab Fundamental and ProShares Russell
Given the investment horizon of 90 days Schwab Fundamental Small is expected to generate 0.94 times more return on investment than ProShares Russell. However, Schwab Fundamental Small is 1.06 times less risky than ProShares Russell. It trades about 0.07 of its potential returns per unit of risk. ProShares Russell 2000 is currently generating about 0.06 per unit of risk. If you would invest 2,423 in Schwab Fundamental Small on August 31, 2024 and sell it today you would earn a total of 799.00 from holding Schwab Fundamental Small or generate 32.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Schwab Fundamental Small vs. ProShares Russell 2000
Performance |
| Timeline |
| Schwab Fundamental Small |
| ProShares Russell 2000 |
Schwab Fundamental and ProShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Fundamental and ProShares Russell
The main advantage of trading using opposite Schwab Fundamental and ProShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, ProShares Russell 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 ProShares Russell will offset losses from the drop in ProShares Russell's long position.The idea behind Schwab Fundamental Small and ProShares Russell 2000 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.
Check out your portfolio center.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 Stocks Directory module to find actively traded stocks across global markets.
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