Correlation Between Schwab Small and Guidemark(r) Small/mid

Can any of the company-specific risk be diversified away by investing in both Schwab Small and Guidemark(r) Small/mid 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 Guidemark(r) Small/mid 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 Guidemark Smallmid Cap, you can compare the effects of market volatilities on Schwab Small and Guidemark(r) Small/mid 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 Guidemark(r) Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Small and Guidemark(r) Small/mid.

Diversification Opportunities for Schwab Small and Guidemark(r) Small/mid

0.87

Correlation Coefficient

Schwab Small  Guidemark(r) Small/mid

Very poor diversification

The 3 months correlation between Schwab and Guidemark(r) is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Guidemark Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Smallmid Cap 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 Guidemark(r) Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Smallmid Cap has no effect on the direction of Schwab Small i.e., Schwab Small and Guidemark(r) Small/mid go up and down completely randomly.

Pair Corralation between Schwab Small and Guidemark(r) Small/mid

Assuming the 90 days horizon Schwab Small Cap Index is expected to generate 1.01 times more return on investment than Guidemark(r) Small/mid. However, Schwab Small is 1.01 times more volatile than Guidemark Smallmid Cap. It trades about -0.19 of its potential returns per unit of risk. Guidemark Smallmid Cap is currently generating about -0.19 per unit of risk. If you would invest  3,493  in Schwab Small Cap Index on December 24, 2024 and sell it today you would lose (189.00) from holding Schwab Small Cap Index or give up 5.41% of portfolio value over 90 days.

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

Schwab Small Cap Index  vs.  Guidemark Smallmid Cap

Schwab Small Cap

Risk-Adjusted Performance

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 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.

Guidemark Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidemark Smallmid Cap 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 primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Schwab Small and Guidemark(r) Small/mid

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

The idea behind Schwab Small Cap Index and Guidemark Smallmid Cap 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.