Correlation Between Schwab Emerging and Xtrackers California

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Can any of the company-specific risk be diversified away by investing in both Schwab Emerging and Xtrackers California 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 Emerging and Xtrackers California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Emerging Markets and Xtrackers California Municipal, you can compare the effects of market volatilities on Schwab Emerging and Xtrackers California 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 Emerging with a short position of Xtrackers California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Emerging and Xtrackers California.

Diversification Opportunities for Schwab Emerging and Xtrackers California

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Schwab and Xtrackers is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Emerging Markets and Xtrackers California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers California and Schwab Emerging 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 Emerging Markets are associated (or correlated) with Xtrackers California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers California has no effect on the direction of Schwab Emerging i.e., Schwab Emerging and Xtrackers California go up and down completely randomly.

Pair Corralation between Schwab Emerging and Xtrackers California

Given the investment horizon of 90 days Schwab Emerging is expected to generate 4.16 times less return on investment than Xtrackers California. In addition to that, Schwab Emerging is 5.47 times more volatile than Xtrackers California Municipal. It trades about 0.0 of its total potential returns per unit of risk. Xtrackers California Municipal is currently generating about 0.04 per unit of volatility. If you would invest  2,509  in Xtrackers California Municipal on December 30, 2023 and sell it today you would earn a total of  14.00  from holding Xtrackers California Municipal or generate 0.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy14.57%
ValuesDaily Returns

Schwab Emerging Markets  vs.  Xtrackers California Municipal

 Performance 
       Timeline  
Schwab Emerging Markets 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Emerging Markets are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Schwab Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Xtrackers California 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab Emerging and Xtrackers California Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schwab Emerging and Xtrackers California

The main advantage of trading using opposite Schwab Emerging and Xtrackers California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Emerging position performs unexpectedly, Xtrackers California 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 Xtrackers California will offset losses from the drop in Xtrackers California's long position.
The idea behind Schwab Emerging Markets and Xtrackers California Municipal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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