Correlation Between SPDR SP and Schwab International

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

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

Diversification Opportunities for SPDR SP and Schwab International

0.99

Correlation Coefficient

SPDR SP  Schwab International

No risk reduction

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

Pair Corralation between SPDR SP and Schwab International

Considering the 90-day investment horizon SPDR SP International is expected to under-perform the Schwab International. In addition to that, SPDR SP is 1.03 times more volatile than Schwab International Small Cap. It trades about -0.07 of its total potential returns per unit of risk. Schwab International Small Cap is currently generating about -0.07 per unit of volatility. If you would invest  3,771  in Schwab International Small Cap on August 30, 2024 and sell it today you would lose (144.00) from holding Schwab International Small Cap or give up 3.82% of portfolio value over 90 days.

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

SPDR SP International  vs.  Schwab International Small Cap

SPDR SP International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Schwab International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR SP and Schwab International

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

The idea behind SPDR SP International and Schwab International Small Cap 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..