Correlation Between Schwab Fundamental and IShares ESG

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

Diversification Opportunities for Schwab Fundamental and IShares ESG

0.97

Correlation Coefficient

Schwab Fundamental  IShares ESG

Almost no diversification

The 3 months correlation between Schwab and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Emerging and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and IShares ESG go up and down completely randomly.

Pair Corralation between Schwab Fundamental and IShares ESG

Given the investment horizon of 90 days Schwab Fundamental Emerging is expected to under-perform the IShares ESG. In addition to that, Schwab Fundamental is 1.05 times more volatile than iShares ESG Aware. It trades about -0.37 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about -0.27 per unit of volatility. If you would invest  3,511  in iShares ESG Aware on October 8, 2024 and sell it today you would lose (143.00) from holding iShares ESG Aware or give up 4.07% of portfolio value over 90 days.

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

Schwab Fundamental Emerging  vs.  iShares ESG Aware

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 latest unsteady performance, the Etf's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

iShares ESG Aware

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Schwab Fundamental and IShares ESG

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

The idea behind Schwab Fundamental Emerging and iShares ESG Aware 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..