Correlation Between Schwab Small and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Schwab Small and Washington Mutual 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 and Washington Mutual 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 Washington Mutual Investors, you can compare the effects of market volatilities on Schwab Small and Washington Mutual 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 with a short position of Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small and Washington Mutual.
Diversification Opportunities for Schwab Small and Washington Mutual
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Schwab and Washington is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual and Schwab Small 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 Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Schwab Small i.e., Schwab Small and Washington Mutual go up and down completely randomly.
Pair Corralation between Schwab Small and Washington Mutual
Assuming the 90 days horizon Schwab Small Cap Index is expected to generate 1.97 times more return on investment than Washington Mutual. However, Schwab Small is 1.97 times more volatile than Washington Mutual Investors. It trades about 0.01 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about -0.01 per unit of risk. If you would invest 3,882 in Schwab Small Cap Index on September 13, 2024 and sell it today you would earn a total of 8.00 from holding Schwab Small Cap Index or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Small Cap Index vs. Washington Mutual Investors
Performance |
| Timeline |
| Schwab Small Cap |
| Washington Mutual |
Schwab Small and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Small and Washington Mutual
The main advantage of trading using opposite Schwab Small and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Small position performs unexpectedly, Washington Mutual 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 Washington Mutual will offset losses from the drop in Washington Mutual's long position.| Schwab Small vs. Schwab International Index | Schwab Small vs. Schwab Total Stock | Schwab Small vs. Schwab Sp 500 | Schwab Small vs. Schwab 1000 Index |
| Washington Mutual vs. Balanced Fund Investor | Washington Mutual vs. Commonwealth Global Fund | Washington Mutual vs. Ab Value Fund | Washington Mutual vs. T Rowe Price |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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