Correlation Between Schwab International and Schwab Mid

Can any of the company-specific risk be diversified away by investing in both Schwab International and Schwab Mid 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 Schwab Mid 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 Schwab Mid Cap ETF, you can compare the effects of market volatilities on Schwab International and Schwab Mid 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 Schwab Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab International and Schwab Mid.

Diversification Opportunities for Schwab International and Schwab Mid

-0.61

Correlation Coefficient

Schwab International  Schwab Mid

Excellent diversification

The 3 months correlation between Schwab and Schwab is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Schwab International Equity and Schwab Mid Cap ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Mid Cap 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 Schwab Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Mid Cap has no effect on the direction of Schwab International i.e., Schwab International and Schwab Mid go up and down completely randomly.

Pair Corralation between Schwab International and Schwab Mid

Given the investment horizon of 90 days Schwab International Equity is expected to generate 0.64 times more return on investment than Schwab Mid. However, Schwab International Equity is 1.57 times less risky than Schwab Mid. It trades about 0.29 of its potential returns per unit of risk. Schwab Mid Cap ETF is currently generating about 0.04 per unit of risk. If you would invest  1,915  in Schwab International Equity on September 14, 2024 and sell it today you would earn a total of  57.00  from holding Schwab International Equity or generate 2.98% return on investment over 90 days.

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

Schwab International Equity  vs.  Schwab Mid Cap ETF

Schwab International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab International Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Schwab International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Schwab Mid Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Mid Cap ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Schwab Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwab International and Schwab Mid

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

The idea behind Schwab International Equity and Schwab Mid Cap ETF 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.