Correlation Between Avantis Small and Schwab Fundamental

Can any of the company-specific risk be diversified away by investing in both Avantis Small and Schwab Fundamental 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 Avantis Small and Schwab Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avantis Small Cap and Schwab Fundamental International, you can compare the effects of market volatilities on Avantis Small and Schwab Fundamental 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 Avantis Small with a short position of Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and Schwab Fundamental.

Diversification Opportunities for Avantis Small and Schwab Fundamental

-0.3

Correlation Coefficient

Avantis Small  Schwab Fundamental

Very good diversification

The 3 months correlation between Avantis and Schwab is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and Schwab Fundamental Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental and Avantis 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 Avantis Small Cap are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental has no effect on the direction of Avantis Small i.e., Avantis Small and Schwab Fundamental go up and down completely randomly.

Pair Corralation between Avantis Small and Schwab Fundamental

Given the investment horizon of 90 days Avantis Small Cap is expected to generate 1.57 times more return on investment than Schwab Fundamental. However, Avantis Small is 1.57 times more volatile than Schwab Fundamental International. It trades about 0.06 of its potential returns per unit of risk. Schwab Fundamental International is currently generating about 0.04 per unit of risk. If you would invest  6,934  in Avantis Small Cap on October 5, 2024 and sell it today you would earn a total of  2,704  from holding Avantis Small Cap or generate 39.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Avantis Small Cap  vs.  Schwab Fundamental Internation

Avantis Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Small Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Avantis Small is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Avantis Small and Schwab Fundamental

The main advantage of trading using opposite Avantis Small and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small position performs unexpectedly, Schwab Fundamental 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 Fundamental will offset losses from the drop in Schwab Fundamental's long position.

The idea behind Avantis Small Cap and Schwab Fundamental International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.