Correlation Between Schwab Fundamental and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and IShares MSCI 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 IShares MSCI 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 iShares MSCI EAFE, you can compare the effects of market volatilities on Schwab Fundamental and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and IShares MSCI.
Diversification Opportunities for Schwab Fundamental and IShares MSCI
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Schwab and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and IShares MSCI go up and down completely randomly.
Pair Corralation between Schwab Fundamental and IShares MSCI
Given the investment horizon of 90 days Schwab Fundamental is expected to generate 1.26 times less return on investment than IShares MSCI. In addition to that, Schwab Fundamental is 1.01 times more volatile than iShares MSCI EAFE. It trades about 0.19 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.24 per unit of volatility. If you would invest 5,178 in iShares MSCI EAFE on October 20, 2024 and sell it today you would earn a total of 148.00 from holding iShares MSCI EAFE or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab Fundamental Internation vs. iShares MSCI EAFE
Performance |
| Timeline |
| Schwab Fundamental |
| iShares MSCI EAFE |
Schwab Fundamental and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab Fundamental and IShares MSCI
The main advantage of trading using opposite Schwab Fundamental and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI'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 |
| IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. WisdomTree International SmallCap | IShares MSCI vs. iShares Russell Mid Cap |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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