Correlation Between IShares Core and Schwab 1000

Can any of the company-specific risk be diversified away by investing in both IShares Core and Schwab 1000 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 Core and Schwab 1000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Core SP and Schwab 1000 ETF, you can compare the effects of market volatilities on IShares Core and Schwab 1000 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 Core with a short position of Schwab 1000. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Schwab 1000.

Diversification Opportunities for IShares Core and Schwab 1000

0.84

Correlation Coefficient

IShares Core  Schwab 1000

Very poor diversification

The 3 months correlation between IShares and Schwab is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Schwab 1000 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab 1000 ETF and IShares Core 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 Core SP are associated (or correlated) with Schwab 1000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab 1000 ETF has no effect on the direction of IShares Core i.e., IShares Core and Schwab 1000 go up and down completely randomly.

Pair Corralation between IShares Core and Schwab 1000

Considering the 90-day investment horizon IShares Core is expected to generate 1.13 times less return on investment than Schwab 1000. But when comparing it to its historical volatility, iShares Core SP is 1.01 times less risky than Schwab 1000. It trades about 0.2 of its potential returns per unit of risk. Schwab 1000 ETF is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,640  in Schwab 1000 ETF on September 2, 2024 and sell it today you would earn a total of  282.00  from holding Schwab 1000 ETF or generate 10.68% return on investment over 90 days.

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

iShares Core SP  vs.  Schwab 1000 ETF

iShares Core SP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Schwab 1000 ETF

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Schwab 1000 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite weak technical indicators, Schwab 1000 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Schwab 1000

The main advantage of trading using opposite IShares Core and Schwab 1000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Schwab 1000 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 1000 will offset losses from the drop in Schwab 1000's long position.

The idea behind iShares Core SP and Schwab 1000 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..