Correlation Between Us Government and Schwab Small-cap
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government 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 Us Government Securities and Schwab Small Cap Equity, you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of Schwab Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Schwab Small-cap.
Diversification Opportunities for Us Government and Schwab Small-cap
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RGVJX and Schwab is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Schwab Small-cap go up and down completely randomly.
Pair Corralation between Us Government and Schwab Small-cap
Assuming the 90 days horizon Us Government is expected to generate 5.57 times less return on investment than Schwab Small-cap. But when comparing it to its historical volatility, Us Government Securities is 4.24 times less risky than Schwab Small-cap. It trades about 0.07 of its potential returns per unit of risk. Schwab Small Cap Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,086 in Schwab Small Cap Equity on September 3, 2024 and sell it today you would earn a total of 322.00 from holding Schwab Small Cap Equity or generate 15.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Schwab Small Cap Equity
Performance |
| Timeline |
| Us Government Securities |
| Schwab Small Cap |
Us Government and Schwab Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Schwab Small-cap
The main advantage of trading using opposite Us Government and Schwab Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Delaware Limited Term Diversified | Us Government vs. Western Asset Diversified | Us Government vs. Calvert Conservative Allocation | Us Government vs. Harbor Diversified International |
| Schwab Small-cap vs. Vanguard Small Cap Index | Schwab Small-cap vs. Vanguard Small Cap Index | Schwab Small-cap vs. Vanguard Small Cap Index | Schwab Small-cap vs. Vanguard Small Cap Index |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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