Correlation Between Fidelity Zero and Schwab Small-cap
Can any of the company-specific risk be diversified away by investing in both Fidelity Zero and Schwab Small-cap 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 Fidelity Zero and Schwab Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Zero Large and Schwab Small Cap Index, you can compare the effects of market volatilities on Fidelity Zero and Schwab Small-cap 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 Fidelity Zero with a short position of Schwab Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Zero and Schwab Small-cap.
Diversification Opportunities for Fidelity Zero and Schwab Small-cap
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Schwab is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Zero Large and Schwab Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Small Cap and Fidelity Zero 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 Fidelity Zero Large are associated (or correlated) with Schwab Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Small Cap has no effect on the direction of Fidelity Zero i.e., Fidelity Zero and Schwab Small-cap go up and down completely randomly.
Pair Corralation between Fidelity Zero and Schwab Small-cap
Assuming the 90 days horizon Fidelity Zero is expected to generate 2.94 times less return on investment than Schwab Small-cap. But when comparing it to its historical volatility, Fidelity Zero Large is 1.91 times less risky than Schwab Small-cap. It trades about 0.16 of its potential returns per unit of risk. Schwab Small Cap Index is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,640 in Schwab Small Cap Index on August 29, 2024 and sell it today you would earn a total of 326.00 from holding Schwab Small Cap Index or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Zero Large vs. Schwab Small Cap Index
Performance |
| Timeline |
| Fidelity Zero Large |
| Schwab Small Cap |
Fidelity Zero and Schwab Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Zero and Schwab Small-cap
The main advantage of trading using opposite Fidelity Zero and Schwab Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Zero position performs unexpectedly, Schwab Small-cap 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 Schwab Small-cap will offset losses from the drop in Schwab Small-cap's long position.| Fidelity Zero vs. Fidelity Extended Market | Fidelity Zero vs. Fidelity Small Cap | Fidelity Zero vs. Fidelity Nasdaq Posite |
| Schwab Small-cap vs. Laudus Large Cap | Schwab Small-cap vs. Schwab Target 2010 | Schwab Small-cap vs. Schwab California Tax Free | Schwab Small-cap vs. Schwab Markettrack Servative |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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