Correlation Between Schwab Fundamental and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and Dimensional ETF 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 Fundamental and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Fundamental International and Dimensional ETF Trust, you can compare the effects of market volatilities on Schwab Fundamental and Dimensional ETF 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 Fundamental with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and Dimensional ETF.
Diversification Opportunities for Schwab Fundamental and Dimensional ETF
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Schwab and Dimensional is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Schwab Fundamental 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 Fundamental International are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Dimensional ETF go up and down completely randomly.
Pair Corralation between Schwab Fundamental and Dimensional ETF
Given the investment horizon of 90 days Schwab Fundamental International is expected to under-perform the Dimensional ETF. But the etf apears to be less risky and, when comparing its historical volatility, Schwab Fundamental International is 1.0 times less risky than Dimensional ETF. The etf trades about -0.16 of its potential returns per unit of risk. The Dimensional ETF Trust is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 2,775 in Dimensional ETF Trust on August 27, 2024 and sell it today you would lose (75.00) from holding Dimensional ETF Trust or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Fundamental Internation vs. Dimensional ETF Trust
Performance |
| Timeline |
| Schwab Fundamental |
| Dimensional ETF Trust |
Schwab Fundamental and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Fundamental and Dimensional ETF
The main advantage of trading using opposite Schwab Fundamental and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.| Schwab Fundamental vs. Schwab Fundamental Small | Schwab Fundamental vs. Schwab Fundamental Large | Schwab Fundamental vs. Schwab Fundamental International | Schwab Fundamental vs. Schwab Fundamental Emerging |
| Dimensional ETF vs. Schwab Fundamental International | Dimensional ETF vs. Schwab Fundamental Emerging | Dimensional ETF vs. Schwab Fundamental Small | Dimensional ETF vs. Schwab Fundamental Large |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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