Correlation Between Schwab Fundamental and Laudus Large

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

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

Diversification Opportunities for Schwab Fundamental and Laudus Large

-0.57

Correlation Coefficient

Schwab Fundamental  Laudus Large

Excellent diversification

The 3 months correlation between Schwab and Laudus is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and Laudus Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laudus Large Cap and Schwab Fundamental 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 Fundamental International are associated (or correlated) with Laudus Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laudus Large Cap has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Laudus Large go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Laudus Large

Assuming the 90 days horizon Schwab Fundamental is expected to generate 1.2 times less return on investment than Laudus Large. But when comparing it to its historical volatility, Schwab Fundamental International is 1.76 times less risky than Laudus Large. It trades about 0.24 of its potential returns per unit of risk. Laudus Large Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,810  in Laudus Large Cap on September 13, 2024 and sell it today you would earn a total of  88.00  from holding Laudus Large Cap or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Schwab Fundamental Internation  vs.  Laudus Large Cap

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 fund investors. In spite of fairly strong essential indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Laudus Large Cap

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Laudus Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Laudus Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwab Fundamental and Laudus Large

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

The idea behind Schwab Fundamental International and Laudus Large Cap 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.