Correlation Between Dimensional Small and Schwab International
Can any of the company-specific risk be diversified away by investing in both Dimensional Small 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 Dimensional Small and Schwab International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Small Cap and Schwab International Equity, you can compare the effects of market volatilities on Dimensional Small 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 Dimensional Small with a short position of Schwab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Schwab International.
Diversification Opportunities for Dimensional Small and Schwab International
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dimensional and Schwab is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Schwab International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab International and Dimensional Small 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 Dimensional Small Cap 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 Dimensional Small i.e., Dimensional Small and Schwab International go up and down completely randomly.
Pair Corralation between Dimensional Small and Schwab International
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 2.04 times more return on investment than Schwab International. However, Dimensional Small is 2.04 times more volatile than Schwab International Equity. It trades about 0.23 of its potential returns per unit of risk. Schwab International Equity is currently generating about -0.12 per unit of risk. If you would invest 6,497 in Dimensional Small Cap on August 30, 2024 and sell it today you would earn a total of 542.00 from holding Dimensional Small Cap or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. Schwab International Equity
Performance |
| Timeline |
| Dimensional Small Cap |
| Schwab International |
Dimensional Small and Schwab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Schwab International
The main advantage of trading using opposite Dimensional Small and Schwab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small 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.| Dimensional Small vs. Dimensional Targeted Value | Dimensional Small vs. Dimensional Equity ETF | Dimensional Small vs. Dimensional Core Equity | Dimensional Small vs. Dimensional International Core |
| Schwab International vs. Schwab Emerging Markets | Schwab International vs. Schwab Small Cap ETF | Schwab International vs. Schwab Large Cap ETF | Schwab International vs. Schwab Broad Market |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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