Correlation Between SPDR Bloomberg and Schwab Fundamental

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

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

Diversification Opportunities for SPDR Bloomberg and Schwab Fundamental

0.96

Correlation Coefficient

SPDR Bloomberg  Schwab Fundamental

Almost no diversification

The 3 months correlation between SPDR and Schwab is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Emerging and Schwab Fundamental Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental and SPDR Bloomberg 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 SPDR Bloomberg Emerging 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 SPDR Bloomberg i.e., SPDR Bloomberg and Schwab Fundamental go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and Schwab Fundamental

Given the investment horizon of 90 days SPDR Bloomberg Emerging is expected to generate 0.61 times more return on investment than Schwab Fundamental. However, SPDR Bloomberg Emerging is 1.63 times less risky than Schwab Fundamental. It trades about -0.06 of its potential returns per unit of risk. Schwab Fundamental International is currently generating about -0.08 per unit of risk. If you would invest  2,044  in SPDR Bloomberg Emerging on August 30, 2024 and sell it today you would lose (38.00) from holding SPDR Bloomberg Emerging or give up 1.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

SPDR Bloomberg Emerging  vs.  Schwab Fundamental Internation

SPDR Bloomberg Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Bloomberg and Schwab Fundamental

The main advantage of trading using opposite SPDR Bloomberg and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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 SPDR Bloomberg Emerging 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.