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 MSCI and Schwab Fundamental Large, 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

0.13

Correlation Coefficient

IShares Core  Schwab Fundamental

Average diversification

The 3 months correlation between IShares and Schwab is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Schwab Fundamental Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental Large 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 MSCI 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 Large 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

Given the investment horizon of 90 days iShares Core MSCI is expected to generate 1.1 times more return on investment than Schwab Fundamental. However, IShares Core is 1.1 times more volatile than Schwab Fundamental Large. It trades about 0.12 of its potential returns per unit of risk. Schwab Fundamental Large is currently generating about 0.02 per unit of risk. If you would invest  6,614  in iShares Core MSCI on December 29, 2024 and sell it today you would earn a total of  414.00  from holding iShares Core MSCI or generate 6.26% return on investment over 90 days.

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

iShares Core MSCI  vs.  Schwab Fundamental Large

iShares Core MSCI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Schwab Fundamental Large

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental Large are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 MSCI and Schwab Fundamental Large 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.