Correlation Between Schwab REIT and IShares Global

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

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

Diversification Opportunities for Schwab REIT and IShares Global

0.99

Correlation Coefficient

Schwab REIT  IShares Global

No risk reduction

The 3 months correlation between Schwab and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Schwab REIT ETF and iShares Global REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global REIT and Schwab REIT 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 REIT ETF are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global REIT has no effect on the direction of Schwab REIT i.e., Schwab REIT and IShares Global go up and down completely randomly.

Pair Corralation between Schwab REIT and IShares Global

Given the investment horizon of 90 days Schwab REIT ETF is expected to under-perform the IShares Global. In addition to that, Schwab REIT is 1.13 times more volatile than iShares Global REIT. It trades about -0.02 of its total potential returns per unit of risk. iShares Global REIT is currently generating about -0.02 per unit of volatility. If you would invest  2,524  in iShares Global REIT on December 5, 2024 and sell it today you would lose (36.00) from holding iShares Global REIT or give up 1.43% of portfolio value over 90 days.

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

Schwab REIT ETF  vs.  iShares Global REIT

Schwab REIT ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab REIT ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Schwab REIT is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

iShares Global REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IShares Global 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 REIT and IShares Global

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

The idea behind Schwab REIT ETF and iShares Global REIT 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.