Correlation Between Schwab Core and Harding Loevner

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

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

Diversification Opportunities for Schwab Core and Harding Loevner

0.28

Correlation Coefficient

Schwab Core  Harding Loevner

Modest diversification

The 3 months correlation between Schwab and Harding is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Schwab E Equity and Harding Loevner Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Emerging and Schwab 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 Schwab E Equity are associated (or correlated) with Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Emerging has no effect on the direction of Schwab Core i.e., Schwab Core and Harding Loevner go up and down completely randomly.

Pair Corralation between Schwab Core and Harding Loevner

Assuming the 90 days horizon Schwab E Equity is expected to generate 0.88 times more return on investment than Harding Loevner. However, Schwab E Equity is 1.13 times less risky than Harding Loevner. It trades about 0.31 of its potential returns per unit of risk. Harding Loevner Emerging is currently generating about -0.17 per unit of risk. If you would invest  2,451  in Schwab E Equity on September 5, 2024 and sell it today you would earn a total of  111.00  from holding Schwab E Equity or generate 4.53% return on investment over 90 days.

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

Schwab E Equity  vs.  Harding Loevner Emerging

Schwab E Equity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab E Equity are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Schwab Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harding Loevner Emerging

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner Emerging are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Harding Loevner 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 Core and Harding Loevner

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

The idea behind Schwab E Equity and Harding Loevner Emerging 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 Stocks Directory module to find actively traded stocks across global markets.