Correlation Between Laudus Large and Schwab Global

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

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

Diversification Opportunities for Laudus Large and Schwab Global

-0.46

Correlation Coefficient

Laudus Large  Schwab Global

Very good diversification

The 3 months correlation between Laudus and Schwab is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Laudus Large Cap and Schwab Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Global Real and Laudus Large 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 Laudus Large Cap are associated (or correlated) with Schwab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Global Real has no effect on the direction of Laudus Large i.e., Laudus Large and Schwab Global go up and down completely randomly.

Pair Corralation between Laudus Large and Schwab Global

Assuming the 90 days horizon Laudus Large Cap is expected to generate 1.38 times more return on investment than Schwab Global. However, Laudus Large is 1.38 times more volatile than Schwab Global Real. It trades about 0.21 of its potential returns per unit of risk. Schwab Global Real is currently generating about -0.02 per unit of risk. If you would invest  2,496  in Laudus Large Cap on September 5, 2024 and sell it today you would earn a total of  343.00  from holding Laudus Large Cap or generate 13.74% return on investment over 90 days.

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

Laudus Large Cap  vs.  Schwab Global Real

Laudus Large Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Laudus Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Laudus Large showed solid returns over the last few months and may actually be approaching a breakup point.

Schwab Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Schwab Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Laudus Large and Schwab Global

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

The idea behind Laudus Large Cap and Schwab Global Real 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.