Correlation Between Schwab Fundamental and Global X

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

Diversification Opportunities for Schwab Fundamental and Global X

0.96

Correlation Coefficient

Schwab Fundamental  Global X

Almost no diversification

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

Pair Corralation between Schwab Fundamental and Global X

Given the investment horizon of 90 days Schwab Fundamental is expected to generate 1.37 times less return on investment than Global X. In addition to that, Schwab Fundamental is 1.13 times more volatile than Global X MSCI. It trades about 0.1 of its total potential returns per unit of risk. Global X MSCI is currently generating about 0.15 per unit of volatility. If you would invest  2,392  in Global X MSCI on December 29, 2024 and sell it today you would earn a total of  197.00  from holding Global X MSCI or generate 8.24% 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.  Global X MSCI

Schwab Fundamental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental Emerging are ranked lower than 7 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X MSCI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Schwab Fundamental and Global X

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

The idea behind Schwab Fundamental Emerging and Global X MSCI 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.