Correlation Between Schwab Small and Gold Portfolio

Can any of the company-specific risk be diversified away by investing in both Schwab Small and Gold Portfolio 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 Gold Portfolio 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 Gold Portfolio Fidelity, you can compare the effects of market volatilities on Schwab Small and Gold Portfolio 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 Gold Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small and Gold Portfolio.

Diversification Opportunities for Schwab Small and Gold Portfolio

-0.17

Correlation Coefficient

Schwab Small  Gold Portfolio

Good diversification

The 3 months correlation between Schwab and Gold is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Gold Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Fidelity 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 Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Fidelity has no effect on the direction of Schwab Small i.e., Schwab Small and Gold Portfolio go up and down completely randomly.

Pair Corralation between Schwab Small and Gold Portfolio

Assuming the 90 days horizon Schwab Small Cap Index is expected to generate 0.74 times more return on investment than Gold Portfolio. However, Schwab Small Cap Index is 1.35 times less risky than Gold Portfolio. It trades about 0.04 of its potential returns per unit of risk. Gold Portfolio Fidelity is currently generating about 0.02 per unit of risk. If you would invest  3,001  in Schwab Small Cap Index on October 22, 2024 and sell it today you would earn a total of  645.00  from holding Schwab Small Cap Index or generate 21.49% return on investment over 90 days.

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

Schwab Small Cap Index  vs.  Gold Portfolio Fidelity

Schwab Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Index are ranked lower than 2 (%) 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.

Gold Portfolio Fidelity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Schwab Small and Gold Portfolio

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

The idea behind Schwab Small Cap Index and Gold Portfolio Fidelity 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.