Correlation Between Schwab Fundamental and IShares Russell

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Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and IShares Russell 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 Fundamental and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schwab Fundamental US and IShares Russell 1000, you can compare the effects of market volatilities on Schwab Fundamental and IShares Russell 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 Fundamental with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and IShares Russell.

Diversification Opportunities for Schwab Fundamental and IShares Russell

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Schwab and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental US and IShares Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Russell 1000 and Schwab Fundamental 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 Fundamental US are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Russell 1000 has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and IShares Russell go up and down completely randomly.

Pair Corralation between Schwab Fundamental and IShares Russell

Given the investment horizon of 90 days Schwab Fundamental is expected to generate 1.03 times less return on investment than IShares Russell. But when comparing it to its historical volatility, Schwab Fundamental US is 1.05 times less risky than IShares Russell. It trades about 0.48 of its potential returns per unit of risk. IShares Russell 1000 is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  17,001  in IShares Russell 1000 on December 30, 2023 and sell it today you would earn a total of  910.00  from holding IShares Russell 1000 or generate 5.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Schwab Fundamental US  vs.  IShares Russell 1000

 Performance 
       Timeline  
Schwab Fundamental 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental US are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Schwab Fundamental may actually be approaching a critical reversion point that can send shares even higher in April 2024.
IShares Russell 1000 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Russell 1000 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Schwab Fundamental and IShares Russell Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schwab Fundamental and IShares Russell

The main advantage of trading using opposite Schwab Fundamental and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.
The idea behind Schwab Fundamental US and IShares Russell 1000 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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