Correlation Between Schwab International and IShares Core
Can any of the company-specific risk be diversified away by investing in both Schwab International and IShares Core 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 IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab International Equity and iShares Core MSCI, you can compare the effects of market volatilities on Schwab International and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab International and IShares Core.
Diversification Opportunities for Schwab International and IShares Core
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Schwab and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Schwab International Equity and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 Equity are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of Schwab International i.e., Schwab International and IShares Core go up and down completely randomly.
Pair Corralation between Schwab International and IShares Core
Given the investment horizon of 90 days Schwab International Equity is expected to under-perform the IShares Core. But the etf apears to be less risky and, when comparing its historical volatility, Schwab International Equity is 1.01 times less risky than IShares Core. The etf trades about -0.18 of its potential returns per unit of risk. The iShares Core MSCI is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 6,770 in iShares Core MSCI on February 1, 2024 and sell it today you would lose (147.00) from holding iShares Core MSCI or give up 2.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schwab International Equity vs. iShares Core MSCI
Performance |
| Timeline |
| Schwab International |
| iShares Core MSCI |
Schwab International and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schwab International and IShares Core
The main advantage of trading using opposite Schwab International and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab International position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| Schwab International vs. Invesco PureBeta MSCI | Schwab International vs. HUMANA INC | Schwab International vs. Aquagold International | Schwab International vs. Barloworld Ltd ADR |
| IShares Core vs. Invesco PureBeta MSCI | IShares Core vs. HUMANA INC | IShares Core vs. Aquagold International | IShares Core vs. Barloworld Ltd ADR |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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