Correlation Between Global X and Schwab Dividend

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

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

Diversification Opportunities for Global X and Schwab Dividend

0.07

Correlation Coefficient

Global X  Schwab Dividend

Significant diversification

The 3 months correlation between Global and Schwab is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global X SP and Schwab Dividend Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Dividend Equity and Global X 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 Global X SP are associated (or correlated) with Schwab Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Dividend Equity has no effect on the direction of Global X i.e., Global X and Schwab Dividend go up and down completely randomly.

Pair Corralation between Global X and Schwab Dividend

Given the investment horizon of 90 days Global X SP is expected to under-perform the Schwab Dividend. But the etf apears to be less risky and, when comparing its historical volatility, Global X SP is 1.06 times less risky than Schwab Dividend. The etf trades about -0.08 of its potential returns per unit of risk. The Schwab Dividend Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,699  in Schwab Dividend Equity on December 28, 2024 and sell it today you would earn a total of  59.00  from holding Schwab Dividend Equity or generate 2.19% return on investment over 90 days.

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

Global X SP  vs.  Schwab Dividend Equity

Global X SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Schwab Dividend Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Dividend Equity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Schwab Dividend is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Global X and Schwab Dividend

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

The idea behind Global X SP and Schwab Dividend 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.