Correlation Between Schwab Small-cap and Artisan Thematic

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

By analyzing existing cross correlation between Schwab Small Cap Index and Artisan Thematic Fund, you can compare the effects of market volatilities on Schwab Small-cap and Artisan Thematic 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 Artisan Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small-cap and Artisan Thematic.

Diversification Opportunities for Schwab Small-cap and Artisan Thematic

0.5

Correlation Coefficient

Schwab Small-cap  Artisan Thematic

Very weak diversification

The 3 months correlation between Schwab and Artisan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Artisan Thematic Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Thematic 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 Index are associated (or correlated) with Artisan Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Thematic has no effect on the direction of Schwab Small-cap i.e., Schwab Small-cap and Artisan Thematic go up and down completely randomly.

Pair Corralation between Schwab Small-cap and Artisan Thematic

Assuming the 90 days horizon Schwab Small Cap Index is expected to under-perform the Artisan Thematic. But the mutual fund apears to be less risky and, when comparing its historical volatility, Schwab Small Cap Index is 1.04 times less risky than Artisan Thematic. The mutual fund trades about -0.25 of its potential returns per unit of risk. The Artisan Thematic Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,264  in Artisan Thematic Fund on October 12, 2024 and sell it today you would lose (43.00) from holding Artisan Thematic Fund or give up 1.9% of portfolio value over 90 days.

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

Schwab Small Cap Index  vs.  Artisan Thematic Fund

Schwab Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Artisan Thematic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Thematic Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Schwab Small-cap and Artisan Thematic

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

The idea behind Schwab Small Cap Index and Artisan Thematic 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.