Correlation Between Schwab International and Schwab Health
Can any of the company-specific risk be diversified away by investing in both Schwab International and Schwab Health 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 International and Schwab Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab International Index and Schwab Health Care, you can compare the effects of market volatilities on Schwab International and Schwab Health 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 International with a short position of Schwab Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab International and Schwab Health.
Diversification Opportunities for Schwab International and Schwab Health
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Schwab and Schwab is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Schwab International Index and Schwab Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Health Care and Schwab International 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 International Index are associated (or correlated) with Schwab Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Health Care has no effect on the direction of Schwab International i.e., Schwab International and Schwab Health go up and down completely randomly.
Pair Corralation between Schwab International and Schwab Health
Assuming the 90 days horizon Schwab International Index is expected to generate 0.98 times more return on investment than Schwab Health. However, Schwab International Index is 1.02 times less risky than Schwab Health. It trades about -0.05 of its potential returns per unit of risk. Schwab Health Care is currently generating about -0.09 per unit of risk. If you would invest 2,431 in Schwab International Index on August 31, 2024 and sell it today you would lose (26.00) from holding Schwab International Index or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab International Index vs. Schwab Health Care
Performance |
| Timeline |
| Schwab International |
| Schwab Health Care |
Schwab International and Schwab Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab International and Schwab Health
The main advantage of trading using opposite Schwab International and Schwab Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab International position performs unexpectedly, Schwab Health 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 Health will offset losses from the drop in Schwab Health's long position.| Schwab International vs. Schwab Small Cap Index | Schwab International vs. Schwab Total Stock | Schwab International vs. Schwab Aggregate Bond | Schwab International vs. Schwab Sp 500 |
| Schwab Health vs. Vy T Rowe | Schwab Health vs. Eaton Vance Atlanta | Schwab Health vs. Blackrock Health Sciences | Schwab Health vs. Blackrock Health Sciences |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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