Correlation Between Schwab Fundamental and SPDR Portfolio

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

Diversification Opportunities for Schwab Fundamental and SPDR Portfolio

0.96

Correlation Coefficient

Schwab Fundamental  SPDR Portfolio

Almost no diversification

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

Pair Corralation between Schwab Fundamental and SPDR Portfolio

Given the investment horizon of 90 days Schwab Fundamental Emerging is expected to generate 1.02 times more return on investment than SPDR Portfolio. However, Schwab Fundamental is 1.02 times more volatile than SPDR Portfolio Emerging. It trades about 0.13 of its potential returns per unit of risk. SPDR Portfolio Emerging is currently generating about 0.08 per unit of risk. If you would invest  2,908  in Schwab Fundamental Emerging on December 28, 2024 and sell it today you would earn a total of  222.00  from holding Schwab Fundamental Emerging or generate 7.63% 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.  SPDR Portfolio Emerging

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 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Schwab Fundamental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SPDR Portfolio Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Emerging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Schwab Fundamental and SPDR Portfolio

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

The idea behind Schwab Fundamental Emerging and SPDR Portfolio 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.