Correlation Between IShares AsiaPacific and Schwab Fundamental

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

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

Diversification Opportunities for IShares AsiaPacific and Schwab Fundamental

0.4

Correlation Coefficient

IShares AsiaPacific  Schwab Fundamental

Very weak diversification

The 3 months correlation between IShares and Schwab is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares AsiaPacific Dividend and Schwab Fundamental Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental and IShares AsiaPacific 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 iShares AsiaPacific Dividend are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental has no effect on the direction of IShares AsiaPacific i.e., IShares AsiaPacific and Schwab Fundamental go up and down completely randomly.

Pair Corralation between IShares AsiaPacific and Schwab Fundamental

Given the investment horizon of 90 days IShares AsiaPacific is expected to generate 1.26 times less return on investment than Schwab Fundamental. In addition to that, IShares AsiaPacific is 1.08 times more volatile than Schwab Fundamental International. It trades about 0.04 of its total potential returns per unit of risk. Schwab Fundamental International is currently generating about 0.06 per unit of volatility. If you would invest  3,467  in Schwab Fundamental International on December 5, 2024 and sell it today you would earn a total of  197.00  from holding Schwab Fundamental International or generate 5.68% return on investment over 90 days.

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

iShares AsiaPacific Dividend  vs.  Schwab Fundamental Internation

iShares AsiaPacific

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares AsiaPacific Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab Fundamental

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares AsiaPacific and Schwab Fundamental

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

The idea behind iShares AsiaPacific Dividend and Schwab Fundamental International 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.