Correlation Between Schwab International and IShares Core

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

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

Diversification Opportunities for Schwab International and IShares Core

-0.19

Correlation Coefficient

Schwab International  IShares Core

Good diversification

The 3 months correlation between Schwab and IShares is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Schwab International Equity and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and Schwab 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 Schwab International Equity are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Schwab International i.e., Schwab International and IShares Core go up and down completely randomly.

Pair Corralation between Schwab International and IShares Core

Given the investment horizon of 90 days Schwab International Equity is expected to generate 0.84 times more return on investment than IShares Core. However, Schwab International Equity is 1.19 times less risky than IShares Core. It trades about 0.15 of its potential returns per unit of risk. iShares Core SP is currently generating about -0.06 per unit of risk. If you would invest  1,851  in Schwab International Equity on December 29, 2024 and sell it today you would earn a total of  145.00  from holding Schwab International Equity or generate 7.83% return on investment over 90 days.

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

Schwab International Equity  vs.  iShares Core SP

Schwab International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab International Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Schwab International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Schwab International and IShares Core

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

The idea behind Schwab International Equity and iShares Core SP 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.