Correlation Between Schwab Fundamental and Xtrackers MSCI

Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and Xtrackers 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 Xtrackers MSCI 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 Xtrackers MSCI Emerging, you can compare the effects of market volatilities on Schwab Fundamental and Xtrackers 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 Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and Xtrackers MSCI.

Diversification Opportunities for Schwab Fundamental and Xtrackers MSCI

0.96

Correlation Coefficient

Schwab Fundamental  Xtrackers MSCI

Almost no diversification

The 3 months correlation between Schwab and Xtrackers is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Emerging and Xtrackers MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers 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 Emerging are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Emerging has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Xtrackers MSCI

Given the investment horizon of 90 days Schwab Fundamental Emerging is expected to generate 1.13 times more return on investment than Xtrackers MSCI. However, Schwab Fundamental is 1.13 times more volatile than Xtrackers MSCI Emerging. It trades about 0.04 of its potential returns per unit of risk. Xtrackers MSCI Emerging is currently generating about 0.03 per unit of risk. If you would invest  2,952  in Schwab Fundamental Emerging on September 1, 2024 and sell it today you would earn a total of  101.00  from holding Schwab Fundamental Emerging or generate 3.42% return on investment over 90 days.

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

Schwab Fundamental Emerging  vs.  Xtrackers MSCI Emerging

Schwab Fundamental

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental Emerging are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers MSCI Emerging

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Schwab Fundamental and Xtrackers MSCI

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

The idea behind Schwab Fundamental Emerging and Xtrackers 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.