Correlation Between Vanguard FTSE and Schwab International
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 Vanguard FTSE and Schwab International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and Schwab International Small Cap, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of Schwab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Schwab International.
Diversification Opportunities for Vanguard FTSE and Schwab International
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Schwab is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed 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 Vanguard FTSE 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 Vanguard FTSE Developed 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 Vanguard FTSE i.e., Vanguard FTSE and Schwab International go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Schwab International
Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the Schwab International. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.06 times less risky than Schwab International. The etf trades about -0.17 of its potential returns per unit of risk. The Schwab International Small Cap is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 3,708 in Schwab International Small Cap on August 29, 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 |
Vanguard FTSE Developed vs. Schwab International Small Cap
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Schwab International |
Vanguard FTSE and Schwab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Schwab International
The main advantage of trading using opposite Vanguard FTSE and Schwab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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