Correlation Between Schwab Fundamental and Pacer Emerging

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

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

Diversification Opportunities for Schwab Fundamental and Pacer Emerging

0.89

Correlation Coefficient

Schwab Fundamental  Pacer Emerging

Very poor diversification

The 3 months correlation between Schwab and Pacer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Emerging and Pacer Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Emerging Markets 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 Emerging are associated (or correlated) with Pacer Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Emerging Markets has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Pacer Emerging go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Pacer Emerging

Given the investment horizon of 90 days Schwab Fundamental is expected to generate 3.12 times less return on investment than Pacer Emerging. In addition to that, Schwab Fundamental is 1.16 times more volatile than Pacer Emerging Markets. It trades about 0.01 of its total potential returns per unit of risk. Pacer Emerging Markets is currently generating about 0.04 per unit of volatility. If you would invest  2,016  in Pacer Emerging Markets on September 15, 2024 and sell it today you would earn a total of  57.00  from holding Pacer Emerging Markets or generate 2.83% return on investment over 90 days.

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

Schwab Fundamental Emerging  vs.  Pacer Emerging Markets

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental Emerging 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Pacer Emerging is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Schwab Fundamental and Pacer Emerging

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

The idea behind Schwab Fundamental Emerging and Pacer Emerging Markets 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.