Correlation Between NYSE Composite and Schwab Small-cap
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite 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 NYSE Composite and Schwab Small Cap Equity, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Schwab Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Schwab Small-cap.
Diversification Opportunities for NYSE Composite and Schwab Small-cap
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and SCHWAB is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Schwab Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Small Cap and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Schwab Small-cap go up and down completely randomly.
Pair Corralation between NYSE Composite and Schwab Small-cap
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.56 times more return on investment than Schwab Small-cap. However, NYSE Composite is 1.8 times less risky than Schwab Small-cap. It trades about 0.08 of its potential returns per unit of risk. Schwab Small Cap Equity is currently generating about 0.04 per unit of risk. If you would invest 1,547,479 in NYSE Composite on August 26, 2024 and sell it today you would earn a total of 464,866 from holding NYSE Composite or generate 30.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Schwab Small Cap Equity
Performance |
| Timeline |
NYSE Composite and Schwab Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Schwab Small Cap Equity
Pair trading matchups for Schwab Small-cap
Pair Trading with NYSE Composite and Schwab Small-cap
The main advantage of trading using opposite NYSE Composite and Schwab Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Glacier Bancorp | NYSE Composite vs. LithiumBank Resources Corp | NYSE Composite vs. Stepstone Group | NYSE Composite vs. Pintec Technology Holdings |
| Schwab Small-cap vs. Calvert High Yield | Schwab Small-cap vs. Pace High Yield | Schwab Small-cap vs. Needham Aggressive Growth | Schwab Small-cap vs. Metropolitan West High |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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