Correlation Between Schwab Fundamental and Vanguard FTSE

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

Diversification Opportunities for Schwab Fundamental and Vanguard FTSE

0.91

Correlation Coefficient

Schwab Fundamental  Vanguard FTSE

Almost no diversification

The 3 months correlation between Schwab and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Emerging and Vanguard FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Emerging has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Vanguard FTSE

Given the investment horizon of 90 days Schwab Fundamental Emerging is expected to generate 1.03 times more return on investment than Vanguard FTSE. However, Schwab Fundamental is 1.03 times more volatile than Vanguard FTSE Emerging. It trades about 0.1 of its potential returns per unit of risk. Vanguard FTSE Emerging is currently generating about 0.08 per unit of risk. If you would invest  2,908  in Schwab Fundamental Emerging on December 29, 2024 and sell it today you would earn a total of  169.00  from holding Schwab Fundamental Emerging or generate 5.81% 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.  Vanguard FTSE 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 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.

Vanguard FTSE Emerging

Risk-Adjusted Performance

Modest

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

Pair Trading with Schwab Fundamental and Vanguard FTSE

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

The idea behind Schwab Fundamental Emerging and Vanguard FTSE 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.