Correlation Between Vanguard FTSE and Schwab International

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

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

Diversification Opportunities for Vanguard FTSE and Schwab International

0.99

Correlation Coefficient

Vanguard FTSE  Schwab International

No risk reduction

The 3 months correlation between Vanguard and Schwab is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and Schwab International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab International and Vanguard FTSE 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 Vanguard FTSE All World 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 Vanguard FTSE i.e., Vanguard FTSE and Schwab International go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Schwab International

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 1.17 times less return on investment than Schwab International. In addition to that, Vanguard FTSE is 1.0 times more volatile than Schwab International Equity. It trades about 0.13 of its total potential returns per unit of risk. Schwab International Equity is currently generating about 0.15 per unit of volatility. If you would invest  1,851  in Schwab International Equity on December 28, 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 Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard FTSE All World  vs.  Schwab International Equity

Vanguard FTSE All

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Vanguard FTSE and Schwab International

The main advantage of trading using opposite Vanguard FTSE and Schwab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 Vanguard FTSE All World and Schwab International Equity 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.