Correlation Between Schwab Fundamental and Dimensional ETF

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

Diversification Opportunities for Schwab Fundamental and Dimensional ETF

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Schwab and Dimensional is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 International are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Dimensional ETF go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Dimensional ETF

Given the investment horizon of 90 days Schwab Fundamental is expected to generate 1.8 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, Schwab Fundamental International is 1.01 times less risky than Dimensional ETF. It trades about 0.08 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,456  in Dimensional ETF Trust on February 27, 2024 and sell it today you would earn a total of  366.00  from holding Dimensional ETF Trust or generate 14.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Schwab Fundamental Internation  vs.  Dimensional ETF Trust

 Performance 
       Timeline  
Schwab Fundamental 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental International are ranked lower than 4 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Dimensional ETF Trust 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dimensional ETF may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Schwab Fundamental and Dimensional ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schwab Fundamental and Dimensional ETF

The main advantage of trading using opposite Schwab Fundamental and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.
The idea behind Schwab Fundamental International and Dimensional ETF Trust 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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