Correlation Between American Funds and Schwab 1000

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Can any of the company-specific risk be diversified away by investing in both American Funds and Schwab 1000 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 American Funds and Schwab 1000 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Schwab 1000 Index, you can compare the effects of market volatilities on American Funds and Schwab 1000 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 American Funds with a short position of Schwab 1000. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Schwab 1000.

Diversification Opportunities for American Funds and Schwab 1000

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between American and Schwab is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AMERICAN FUNDS FUNDAMENTAL and SCHWAB 1000 INDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab 1000 Index and American Funds 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 American Funds Fundamental are associated (or correlated) with Schwab 1000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab 1000 Index has no effect on the direction of American Funds i.e., American Funds and Schwab 1000 go up and down completely randomly.

Pair Corralation between American Funds and Schwab 1000

If you would invest (100.00) in Schwab 1000 Index on December 29, 2023 and sell it today you would earn a total of  100.00  from holding Schwab 1000 Index or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AMERICAN FUNDS FUNDAMENTAL  vs.  SCHWAB 1000 INDEX

 Performance 
       Timeline  
American Funds Funda 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Solid
Over the last 90 days American Funds Fundamental has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Schwab 1000 Index 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Schwab 1000 Index are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Schwab 1000 may actually be approaching a critical reversion point that can send shares even higher in April 2024.

American Funds and Schwab 1000 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Funds and Schwab 1000

The main advantage of trading using opposite American Funds and Schwab 1000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Schwab 1000 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 Schwab 1000 will offset losses from the drop in Schwab 1000's long position.
The idea behind American Funds Fundamental and Schwab 1000 Index 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.
Check out your portfolio center.
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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