Correlation Between Schwab Fundamental and EA Series

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

By analyzing existing cross correlation between Schwab Fundamental Small and EA Series Trust, you can compare the effects of market volatilities on Schwab Fundamental and EA Series 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 Fundamental with a short position of EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and EA Series.

Diversification Opportunities for Schwab Fundamental and EA Series

0.99

Correlation Coefficient

Schwab Fundamental  EA Series

No risk reduction

The 3 months correlation between Schwab and STXK is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Small and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust and Schwab Fundamental 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 Fundamental Small are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and EA Series go up and down completely randomly.

Pair Corralation between Schwab Fundamental and EA Series

Given the investment horizon of 90 days Schwab Fundamental Small is expected to generate 0.96 times more return on investment than EA Series. However, Schwab Fundamental Small is 1.04 times less risky than EA Series. It trades about 0.14 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.13 per unit of risk. If you would invest  2,924  in Schwab Fundamental Small on August 30, 2024 and sell it today you would earn a total of  295.00  from holding Schwab Fundamental Small or generate 10.09% return on investment over 90 days.

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

Schwab Fundamental Small  vs.  EA Series Trust

Schwab Fundamental Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental Small are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Schwab Fundamental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

EA Series Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Schwab Fundamental and EA Series

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

The idea behind Schwab Fundamental Small and EA Series Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.