Correlation Between Schwab Fundamental and SPDR MSCI

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

By analyzing existing cross correlation between Schwab Fundamental International and SPDR MSCI Emerging, you can compare the effects of market volatilities on Schwab Fundamental and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and SPDR MSCI.

Diversification Opportunities for Schwab Fundamental and SPDR MSCI

0.82

Correlation Coefficient

Schwab Fundamental  SPDR MSCI

Very poor diversification

The 3 months correlation between Schwab and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Emerging 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 International are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and SPDR MSCI go up and down completely randomly.

Pair Corralation between Schwab Fundamental and SPDR MSCI

Given the investment horizon of 90 days Schwab Fundamental International is expected to under-perform the SPDR MSCI. In addition to that, Schwab Fundamental is 1.14 times more volatile than SPDR MSCI Emerging. It trades about -0.08 of its total potential returns per unit of risk. SPDR MSCI Emerging is currently generating about 0.01 per unit of volatility. If you would invest  5,761  in SPDR MSCI Emerging on January 30, 2024 and sell it today you would earn a total of  10.00  from holding SPDR MSCI Emerging or generate 0.17% return on investment over 90 days.

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

Schwab Fundamental Internation  vs.  SPDR MSCI Emerging

Schwab Fundamental

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR MSCI Emerging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Emerging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, SPDR MSCI is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Schwab Fundamental and SPDR MSCI

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

The idea behind Schwab Fundamental International and SPDR MSCI Emerging 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .