Correlation Between Laudus International and Schwab Large

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

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

Diversification Opportunities for Laudus International and Schwab Large

-0.43

Correlation Coefficient

Laudus International  Schwab Large

Very good diversification

The 3 months correlation between Laudus and Schwab is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Laudus International Marketmas and Schwab Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Large Cap and Laudus International 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 International Marketmasters are associated (or correlated) with Schwab Large. 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 Laudus International i.e., Laudus International and Schwab Large go up and down completely randomly.

Pair Corralation between Laudus International and Schwab Large

Assuming the 90 days horizon Laudus International Marketmasters is expected to under-perform the Schwab Large. In addition to that, Laudus International is 1.21 times more volatile than Schwab Large Cap Value. It trades about -0.01 of its total potential returns per unit of risk. Schwab Large Cap Value is currently generating about 0.14 per unit of volatility. If you would invest  5,801  in Schwab Large Cap Value on September 12, 2024 and sell it today you would earn a total of  320.00  from holding Schwab Large Cap Value or generate 5.52% return on investment over 90 days.

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

Laudus International Marketmas  vs.  Schwab Large Cap Value

Laudus International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Schwab Large Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Large Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Large 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 International and Schwab Large

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

The idea behind Laudus International Marketmasters and Schwab Large Cap Value 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.