Correlation Between Schwab Small-cap and Lazard International

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

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

Diversification Opportunities for Schwab Small-cap and Lazard International

-0.63

Correlation Coefficient

Schwab Small-cap  Lazard International

Excellent diversification

The 3 months correlation between Schwab and Lazard is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Equity and Lazard International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard International and Schwab Small-cap 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 Small Cap Equity are associated (or correlated) with Lazard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard International has no effect on the direction of Schwab Small-cap i.e., Schwab Small-cap and Lazard International go up and down completely randomly.

Pair Corralation between Schwab Small-cap and Lazard International

Assuming the 90 days horizon Schwab Small Cap Equity is expected to generate 1.79 times more return on investment than Lazard International. However, Schwab Small-cap is 1.79 times more volatile than Lazard International Small. It trades about 0.17 of its potential returns per unit of risk. Lazard International Small is currently generating about -0.15 per unit of risk. If you would invest  2,201  in Schwab Small Cap Equity on September 5, 2024 and sell it today you would earn a total of  208.00  from holding Schwab Small Cap Equity or generate 9.45% return on investment over 90 days.

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

Schwab Small Cap Equity  vs.  Lazard International Small

Schwab Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Schwab Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lazard International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Schwab Small-cap and Lazard International

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

The idea behind Schwab Small Cap Equity and Lazard International Small 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.