Correlation Between IShares Core and Schwab Fundamental

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

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

Diversification Opportunities for IShares Core and Schwab Fundamental

1.0

Correlation Coefficient

IShares Core  Schwab Fundamental

No risk reduction

The 3 months correlation between IShares and Schwab is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP 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 IShares Core 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 iShares Core SP 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 IShares Core i.e., IShares Core and Schwab Fundamental go up and down completely randomly.

Pair Corralation between IShares Core and Schwab Fundamental

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the Schwab Fundamental. In addition to that, IShares Core is 1.05 times more volatile than Schwab Fundamental Small. It trades about -0.13 of its total potential returns per unit of risk. Schwab Fundamental Small is currently generating about -0.11 per unit of volatility. If you would invest  2,953  in Schwab Fundamental Small on December 29, 2024 and sell it today you would lose (219.00) from holding Schwab Fundamental Small or give up 7.42% of portfolio value over 90 days.

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

iShares Core SP  vs.  Schwab Fundamental Small

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Etf's forward-looking indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Schwab Fundamental Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Fundamental Small has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Core and Schwab Fundamental

The main advantage of trading using opposite IShares Core and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP 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 CEOs Directory module to screen CEOs from public companies around the world.