Correlation Between Schwab Small-cap and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Schwab Small-cap and Stone Ridge 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 Stone Ridge 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 Stone Ridge Diversified, you can compare the effects of market volatilities on Schwab Small-cap and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small-cap and Stone Ridge.
Diversification Opportunities for Schwab Small-cap and Stone Ridge
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Schwab and Stone is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Schwab Small-cap i.e., Schwab Small-cap and Stone Ridge go up and down completely randomly.
Pair Corralation between Schwab Small-cap and Stone Ridge
Assuming the 90 days horizon Schwab Small Cap Index is expected to generate 6.43 times more return on investment than Stone Ridge. However, Schwab Small-cap is 6.43 times more volatile than Stone Ridge Diversified. It trades about 0.09 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.12 per unit of risk. If you would invest 2,615 in Schwab Small Cap Index on October 25, 2024 and sell it today you would earn a total of 1,076 from holding Schwab Small Cap Index or generate 41.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Small Cap Index vs. Stone Ridge Diversified
Performance |
| Timeline |
| Schwab Small Cap |
| Stone Ridge Diversified |
Schwab Small-cap and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Small-cap and Stone Ridge
The main advantage of trading using opposite Schwab Small-cap and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Small-cap position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| 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 |
| Stone Ridge vs. Blackrock Alternative Capital | Stone Ridge vs. Blackrock Systematic Multi Strategy | Stone Ridge vs. HUMANA INC | Stone Ridge vs. Aquagold International |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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