Correlation Between Schwab Treasury and Alger Smidcap

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

By analyzing existing cross correlation between Schwab Treasury Inflation and Alger Smidcap Focus, you can compare the effects of market volatilities on Schwab Treasury and Alger Smidcap 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 Treasury with a short position of Alger Smidcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Treasury and Alger Smidcap.

Diversification Opportunities for Schwab Treasury and Alger Smidcap

-0.02

Correlation Coefficient

Schwab Treasury  Alger Smidcap

Good diversification

The 3 months correlation between Schwab and Alger is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Inflation and Alger Smidcap Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smidcap Focus and Schwab Treasury 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 Treasury Inflation are associated (or correlated) with Alger Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smidcap Focus has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Alger Smidcap go up and down completely randomly.

Pair Corralation between Schwab Treasury and Alger Smidcap

Assuming the 90 days horizon Schwab Treasury Inflation is expected to under-perform the Alger Smidcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Schwab Treasury Inflation is 6.2 times less risky than Alger Smidcap. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Alger Smidcap Focus is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,485  in Alger Smidcap Focus on October 21, 2024 and sell it today you would earn a total of  114.00  from holding Alger Smidcap Focus or generate 7.68% return on investment over 90 days.

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

Schwab Treasury Inflation  vs.  Alger Smidcap Focus

Schwab Treasury Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alger Smidcap Focus

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smidcap Focus are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Smidcap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Schwab Treasury and Alger Smidcap

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

The idea behind Schwab Treasury Inflation and Alger Smidcap Focus 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.