Correlation Between Schwab Small and Comstock Capital

Can any of the company-specific risk be diversified away by investing in both Schwab Small and Comstock Capital 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 and Comstock Capital 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 Comstock Capital Value, you can compare the effects of market volatilities on Schwab Small and Comstock Capital 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 with a short position of Comstock Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small and Comstock Capital.

Diversification Opportunities for Schwab Small and Comstock Capital

0.27

Correlation Coefficient

Schwab Small  Comstock Capital

Modest diversification

The 3 months correlation between Schwab and Comstock is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Comstock Capital Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comstock Capital Value and Schwab Small 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 Comstock Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comstock Capital Value has no effect on the direction of Schwab Small i.e., Schwab Small and Comstock Capital go up and down completely randomly.

Pair Corralation between Schwab Small and Comstock Capital

Assuming the 90 days horizon Schwab Small Cap Index is expected to generate 4.04 times more return on investment than Comstock Capital. However, Schwab Small is 4.04 times more volatile than Comstock Capital Value. It trades about 0.04 of its potential returns per unit of risk. Comstock Capital Value is currently generating about 0.06 per unit of risk. If you would invest  3,535  in Schwab Small Cap Index on October 23, 2024 and sell it today you would earn a total of  111.00  from holding Schwab Small Cap Index or generate 3.14% return on investment over 90 days.

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

Schwab Small Cap Index  vs.  Comstock Capital Value

Schwab Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Comstock Capital Value

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Capital Value are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Comstock Capital 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 and Comstock Capital

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

The idea behind Schwab Small Cap Index and Comstock Capital 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.