Correlation Between IShares Edge and Schwab International
Can any of the company-specific risk be diversified away by investing in both IShares Edge 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 IShares Edge and Schwab International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Edge MSCI and Schwab International Small Cap, you can compare the effects of market volatilities on IShares Edge 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 IShares Edge with a short position of Schwab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and Schwab International.
Diversification Opportunities for IShares Edge and Schwab International
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Schwab is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and Schwab International Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab International and IShares Edge 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 iShares Edge MSCI 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 IShares Edge i.e., IShares Edge and Schwab International go up and down completely randomly.
Pair Corralation between IShares Edge and Schwab International
Given the investment horizon of 90 days iShares Edge MSCI is expected to under-perform the Schwab International. In addition to that, IShares Edge is 1.03 times more volatile than Schwab International Small Cap. It trades about -0.16 of its total potential returns per unit of risk. Schwab International Small Cap is currently generating about -0.15 per unit of volatility. If you would invest 3,708 in Schwab International Small Cap on August 28, 2024 and sell it today you would lose (101.00) from holding Schwab International Small Cap or give up 2.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Edge MSCI vs. Schwab International Small Cap
Performance |
| Timeline |
| iShares Edge MSCI |
| Schwab International |
IShares Edge and Schwab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and Schwab International
The main advantage of trading using opposite IShares Edge and Schwab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge 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.| IShares Edge vs. iShares Equity Factor | IShares Edge vs. iShares MSCI Emerging | IShares Edge vs. iShares MSCI USA | IShares Edge vs. iShares MSCI Intl |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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