Correlation Between SPDR SP and Schwab International
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Schwab International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Schwab International Small Cap, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Schwab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Schwab International.
Diversification Opportunities for SPDR SP and Schwab International
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and Schwab is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR SP 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 SPDR SP 500 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 SPDR SP i.e., SPDR SP and Schwab International go up and down completely randomly.
Pair Corralation between SPDR SP and Schwab International
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.07 times more return on investment than Schwab International. However, SPDR SP is 1.07 times more volatile than Schwab International Small Cap. It trades about 0.18 of its potential returns per unit of risk. Schwab International Small Cap is currently generating about -0.15 per unit of risk. If you would invest 58,083 in SPDR SP 500 on August 29, 2024 and sell it today you would earn a total of 1,982 from holding SPDR SP 500 or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Schwab International Small Cap
Performance |
| Timeline |
| SPDR SP 500 |
| Schwab International |
SPDR SP and Schwab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Schwab International
The main advantage of trading using opposite SPDR SP and Schwab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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