Correlation Between Fm Investments and Schwab Large-cap

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

By analyzing existing cross correlation between Fm Investments Large and Schwab Large Cap Growth, you can compare the effects of market volatilities on Fm Investments and Schwab Large-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 Fm Investments with a short position of Schwab Large-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fm Investments and Schwab Large-cap.

Diversification Opportunities for Fm Investments and Schwab Large-cap

0.99

Correlation Coefficient

Fm Investments  Schwab Large-cap

No risk reduction

The 3 months correlation between IAFLX and Schwab is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fm Investments Large and Schwab Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Large Cap and Fm Investments 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 Fm Investments Large are associated (or correlated) with Schwab Large-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 Large Cap has no effect on the direction of Fm Investments i.e., Fm Investments and Schwab Large-cap go up and down completely randomly.

Pair Corralation between Fm Investments and Schwab Large-cap

Assuming the 90 days horizon Fm Investments is expected to generate 1.33 times less return on investment than Schwab Large-cap. In addition to that, Fm Investments is 1.32 times more volatile than Schwab Large Cap Growth. It trades about 0.07 of its total potential returns per unit of risk. Schwab Large Cap Growth is currently generating about 0.13 per unit of volatility. If you would invest  2,027  in Schwab Large Cap Growth on September 6, 2024 and sell it today you would earn a total of  1,655  from holding Schwab Large Cap Growth or generate 81.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Fm Investments Large  vs.  Schwab Large Cap Growth

Fm Investments Large

Risk-Adjusted Performance

19 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fm Investments Large are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Fm Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Schwab Large Cap

Risk-Adjusted Performance

20 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Large Cap Growth are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Schwab Large-cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fm Investments and Schwab Large-cap

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

The idea behind Fm Investments Large and Schwab Large Cap Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.