Correlation Between Vanguard FTSE and Schwab REIT
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Schwab REIT 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 REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE All World and Schwab REIT ETF, you can compare the effects of market volatilities on Vanguard FTSE and Schwab REIT 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 REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Schwab REIT.
Diversification Opportunities for Vanguard FTSE and Schwab REIT
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Schwab is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and Schwab REIT ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab REIT ETF 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 All World are associated (or correlated) with Schwab REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab REIT ETF has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Schwab REIT go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Schwab REIT
Considering the 90-day investment horizon Vanguard FTSE All World is expected to under-perform the Schwab REIT. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE All World is 1.3 times less risky than Schwab REIT. The etf trades about -0.11 of its potential returns per unit of risk. The Schwab REIT ETF is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,283 in Schwab REIT ETF on August 28, 2024 and sell it today you would earn a total of 19.00 from holding Schwab REIT ETF or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE All World vs. Schwab REIT ETF
Performance |
| Timeline |
| Vanguard FTSE All |
| Schwab REIT ETF |
Vanguard FTSE and Schwab REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Schwab REIT
The main advantage of trading using opposite Vanguard FTSE and Schwab REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Schwab REIT 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 REIT will offset losses from the drop in Schwab REIT's long position.| Vanguard FTSE vs. iShares MSCI USA | Vanguard FTSE vs. iShares Edge MSCI | Vanguard FTSE vs. iShares MSCI Intl | Vanguard FTSE vs. iShares MSCI Emerging |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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