Correlation Between Schwab Us and Schwab International

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

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

Diversification Opportunities for Schwab Us and Schwab International

0.7

Correlation Coefficient

Schwab Us  Schwab International

Poor diversification

The 3 months correlation between Schwab and Schwab is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Aggregate Bond and Schwab International Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab International and Schwab Us 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 Aggregate Bond are associated (or correlated) with Schwab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab International has no effect on the direction of Schwab Us i.e., Schwab Us and Schwab International go up and down completely randomly.

Pair Corralation between Schwab Us and Schwab International

Assuming the 90 days horizon Schwab Aggregate Bond is expected to generate 0.36 times more return on investment than Schwab International. However, Schwab Aggregate Bond is 2.8 times less risky than Schwab International. It trades about -0.06 of its potential returns per unit of risk. Schwab International Index is currently generating about -0.05 per unit of risk. If you would invest  907.00  in Schwab Aggregate Bond on September 4, 2024 and sell it today you would lose (11.00) from holding Schwab Aggregate Bond or give up 1.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Schwab Aggregate Bond  vs.  Schwab International Index

Schwab Aggregate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Aggregate Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Schwab Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab International Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Schwab International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schwab Us and Schwab International

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

The idea behind Schwab Aggregate Bond and Schwab International Index 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.