Correlation Between IShares Currency and Schwab Fundamental

Can any of the company-specific risk be diversified away by investing in both IShares Currency and Schwab Fundamental 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 IShares Currency and Schwab Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Currency Hedged and Schwab Fundamental International, you can compare the effects of market volatilities on IShares Currency and Schwab Fundamental 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 IShares Currency with a short position of Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Currency and Schwab Fundamental.

Diversification Opportunities for IShares Currency and Schwab Fundamental

0.76

Correlation Coefficient

IShares Currency  Schwab Fundamental

Poor diversification

The 3 months correlation between IShares and Schwab is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and Schwab Fundamental Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental and IShares Currency 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 iShares Currency Hedged are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental has no effect on the direction of IShares Currency i.e., IShares Currency and Schwab Fundamental go up and down completely randomly.

Pair Corralation between IShares Currency and Schwab Fundamental

Given the investment horizon of 90 days iShares Currency Hedged is expected to generate 0.75 times more return on investment than Schwab Fundamental. However, iShares Currency Hedged is 1.33 times less risky than Schwab Fundamental. It trades about 0.24 of its potential returns per unit of risk. Schwab Fundamental International is currently generating about 0.11 per unit of risk. If you would invest  2,984  in iShares Currency Hedged on February 18, 2024 and sell it today you would earn a total of  248.00  from holding iShares Currency Hedged or generate 8.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares Currency Hedged  vs.  Schwab Fundamental Internation

iShares Currency Hedged

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, IShares Currency may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Schwab Fundamental

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Currency and Schwab Fundamental

The main advantage of trading using opposite IShares Currency and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency position performs unexpectedly, Schwab Fundamental 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 Fundamental will offset losses from the drop in Schwab Fundamental's long position.

The idea behind iShares Currency Hedged and Schwab Fundamental International 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.