Correlation Between Schwab Fundamental and Avantis Equity

Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and Avantis Equity 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 Avantis Equity 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 Avantis Equity ETF, you can compare the effects of market volatilities on Schwab Fundamental and Avantis Equity 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 Avantis Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and Avantis Equity.

Diversification Opportunities for Schwab Fundamental and Avantis Equity

-0.59

Correlation Coefficient

Schwab Fundamental  Avantis Equity

Excellent diversification

The 3 months correlation between Schwab and Avantis is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and Avantis Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Equity ETF 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 Avantis Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Equity ETF has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Avantis Equity go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Avantis Equity

Given the investment horizon of 90 days Schwab Fundamental International is expected to under-perform the Avantis Equity. In addition to that, Schwab Fundamental is 1.07 times more volatile than Avantis Equity ETF. It trades about -0.04 of its total potential returns per unit of risk. Avantis Equity ETF is currently generating about 0.21 per unit of volatility. If you would invest  9,154  in Avantis Equity ETF on September 12, 2024 and sell it today you would earn a total of  924.00  from holding Avantis Equity ETF or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Schwab Fundamental Internation  vs.  Avantis Equity ETF

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Avantis Equity ETF

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Equity ETF are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Avantis Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwab Fundamental and Avantis Equity

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

The idea behind Schwab Fundamental International and Avantis Equity ETF 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.