Correlation Between Schwab Fundamental and FlexShares International

Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and FlexShares International 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 FlexShares International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schwab Fundamental International and FlexShares International Quality, you can compare the effects of market volatilities on Schwab Fundamental and FlexShares International 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 FlexShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and FlexShares International.

Diversification Opportunities for Schwab Fundamental and FlexShares International

1.0

Correlation Coefficient

Schwab Fundamental  FlexShares International

No risk reduction

The 3 months correlation between Schwab and FlexShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and FlexShares International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares International 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 International are associated (or correlated) with FlexShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares International has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and FlexShares International go up and down completely randomly.

Pair Corralation between Schwab Fundamental and FlexShares International

Given the investment horizon of 90 days Schwab Fundamental International is expected to generate 1.05 times more return on investment than FlexShares International. However, Schwab Fundamental is 1.05 times more volatile than FlexShares International Quality. It trades about 0.18 of its potential returns per unit of risk. FlexShares International Quality is currently generating about 0.16 per unit of risk. If you would invest  3,316  in Schwab Fundamental International on December 30, 2024 and sell it today you would earn a total of  329.00  from holding Schwab Fundamental International or generate 9.92% 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 Internation  vs.  FlexShares International Quali

Schwab Fundamental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Schwab Fundamental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

FlexShares International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares International Quality are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, FlexShares International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Schwab Fundamental and FlexShares International

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

The idea behind Schwab Fundamental International and FlexShares International Quality 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.