Correlation Between IShares ESG and Schwab International

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

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

Diversification Opportunities for IShares ESG and Schwab International

1.0

Correlation Coefficient

IShares ESG  Schwab International

No risk reduction

The 3 months correlation between IShares and Schwab is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Schwab International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab International and IShares ESG 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 ESG Aware are associated (or correlated) with Schwab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab International has no effect on the direction of IShares ESG i.e., IShares ESG and Schwab International go up and down completely randomly.

Pair Corralation between IShares ESG and Schwab International

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 1.02 times more return on investment than Schwab International. However, IShares ESG is 1.02 times more volatile than Schwab International Equity. It trades about 0.18 of its potential returns per unit of risk. Schwab International Equity is currently generating about 0.18 per unit of risk. If you would invest  7,673  in iShares ESG Aware on December 26, 2024 and sell it today you would earn a total of  732.00  from holding iShares ESG Aware or generate 9.54% return on investment over 90 days.

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

iShares ESG Aware  vs.  Schwab International Equity

iShares ESG Aware

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Schwab International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab International Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Schwab International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares ESG and Schwab International

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

The idea behind iShares ESG Aware and Schwab International Equity 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.