Correlation Between Schwartz Value and Tanaka Growth

Can any of the company-specific risk be diversified away by investing in both Schwartz Value and Tanaka Growth 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 Schwartz Value and Tanaka Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schwartz Value Focused and Tanaka Growth Fund, you can compare the effects of market volatilities on Schwartz Value and Tanaka Growth 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 Schwartz Value with a short position of Tanaka Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwartz Value and Tanaka Growth.

Diversification Opportunities for Schwartz Value and Tanaka Growth

0.89

Correlation Coefficient

Schwartz Value  Tanaka Growth

Very poor diversification

The 3 months correlation between Schwartz and Tanaka is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Schwartz Value Focused and Tanaka Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanaka Growth and Schwartz Value 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 Schwartz Value Focused are associated (or correlated) with Tanaka Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanaka Growth has no effect on the direction of Schwartz Value i.e., Schwartz Value and Tanaka Growth go up and down completely randomly.

Pair Corralation between Schwartz Value and Tanaka Growth

Assuming the 90 days horizon Schwartz Value Focused is expected to under-perform the Tanaka Growth. In addition to that, Schwartz Value is 2.11 times more volatile than Tanaka Growth Fund. It trades about -0.27 of its total potential returns per unit of risk. Tanaka Growth Fund is currently generating about -0.21 per unit of volatility. If you would invest  5,234  in Tanaka Growth Fund on September 22, 2024 and sell it today you would lose (274.00) from holding Tanaka Growth Fund or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Schwartz Value Focused  vs.  Tanaka Growth Fund

Schwartz Value Focused

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schwartz Value Focused are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Schwartz Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tanaka Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tanaka Growth Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tanaka Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwartz Value and Tanaka Growth

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

The idea behind Schwartz Value Focused and Tanaka Growth Fund 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 Global Correlations module to find global opportunities by holding instruments from different markets.