Correlation Between Xtrackers International and Schwab Fundamental

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

By analyzing existing cross correlation between Xtrackers International Real and Schwab Fundamental Small, you can compare the effects of market volatilities on Xtrackers International and Schwab Fundamental 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 Xtrackers International with a short position of Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers International and Schwab Fundamental.

Diversification Opportunities for Xtrackers International and Schwab Fundamental

-0.57

Correlation Coefficient

Xtrackers International  Schwab Fundamental

Excellent diversification

The 3 months correlation between Xtrackers and Schwab is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers International Real and Schwab Fundamental Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental Small and Xtrackers International 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 Xtrackers International Real are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental Small has no effect on the direction of Xtrackers International i.e., Xtrackers International and Schwab Fundamental go up and down completely randomly.

Pair Corralation between Xtrackers International and Schwab Fundamental

Given the investment horizon of 90 days Xtrackers International Real is expected to under-perform the Schwab Fundamental. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers International Real is 1.24 times less risky than Schwab Fundamental. The etf trades about -0.07 of its potential returns per unit of risk. The Schwab Fundamental Small is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,924  in Schwab Fundamental Small on August 30, 2024 and sell it today you would earn a total of  295.00  from holding Schwab Fundamental Small or generate 10.09% return on investment over 90 days.

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

Xtrackers International Real  vs.  Schwab Fundamental Small

Xtrackers International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers International Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Xtrackers International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Schwab Fundamental Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental Small are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Schwab Fundamental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Xtrackers International and Schwab Fundamental

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

The idea behind Xtrackers International Real and Schwab Fundamental Small 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..