Correlation Between Schwab Small-cap and First Eagle
Can any of the company-specific risk be diversified away by investing in both Schwab Small-cap and First Eagle 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 Small-cap and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Small Cap Index and First Eagle Small, you can compare the effects of market volatilities on Schwab Small-cap and First Eagle 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 Small-cap with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small-cap and First Eagle.
Diversification Opportunities for Schwab Small-cap and First Eagle
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Schwab and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and First Eagle Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Small and Schwab Small-cap 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 Small Cap Index are associated (or correlated) with First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Small has no effect on the direction of Schwab Small-cap i.e., Schwab Small-cap and First Eagle go up and down completely randomly.
Pair Corralation between Schwab Small-cap and First Eagle
Assuming the 90 days horizon Schwab Small-cap is expected to generate 1.96 times less return on investment than First Eagle. In addition to that, Schwab Small-cap is 1.06 times more volatile than First Eagle Small. It trades about 0.13 of its total potential returns per unit of risk. First Eagle Small is currently generating about 0.28 per unit of volatility. If you would invest 1,021 in First Eagle Small on October 20, 2024 and sell it today you would earn a total of 53.00 from holding First Eagle Small or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Small Cap Index vs. First Eagle Small
Performance |
| Timeline |
| Schwab Small Cap |
| First Eagle Small |
Schwab Small-cap and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Small-cap and First Eagle
The main advantage of trading using opposite Schwab Small-cap and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Small-cap position performs unexpectedly, First Eagle 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 First Eagle will offset losses from the drop in First Eagle's long position.| Schwab Small-cap vs. Schwab International Index | Schwab Small-cap vs. Schwab Total Stock | Schwab Small-cap vs. Schwab Sp 500 | Schwab Small-cap vs. Schwab 1000 Index |
| First Eagle vs. Schwab Small Cap Index | First Eagle vs. Tax Managed Mid Small | First Eagle vs. Fulcrum Diversified Absolute | First Eagle vs. Aqr Diversified Arbitrage |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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