Correlation Between Schwab 1 and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Schwab 1 and IShares MSCI 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 1 and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schwab 1 5 Year and iShares MSCI Israel, you can compare the effects of market volatilities on Schwab 1 and IShares MSCI 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 1 with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab 1 and IShares MSCI.

Diversification Opportunities for Schwab 1 and IShares MSCI

-0.56

Correlation Coefficient

Schwab 1  IShares MSCI

Excellent diversification

The 3 months correlation between Schwab and IShares is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Schwab 1 5 Year and iShares MSCI Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Israel and Schwab 1 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 1 5 Year are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Israel has no effect on the direction of Schwab 1 i.e., Schwab 1 and IShares MSCI go up and down completely randomly.

Pair Corralation between Schwab 1 and IShares MSCI

Given the investment horizon of 90 days Schwab 1 5 Year is expected to generate 0.12 times more return on investment than IShares MSCI. However, Schwab 1 5 Year is 8.14 times less risky than IShares MSCI. It trades about 0.13 of its potential returns per unit of risk. iShares MSCI Israel is currently generating about 0.01 per unit of risk. If you would invest  2,414  in Schwab 1 5 Year on February 2, 2025 and sell it today you would earn a total of  40.00  from holding Schwab 1 5 Year or generate 1.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Schwab 1 5 Year  vs.  iShares MSCI Israel

Schwab 1 5

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab 1 5 Year are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical indicators, Schwab 1 is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

iShares MSCI Israel

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI Israel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Schwab 1 and IShares MSCI

The main advantage of trading using opposite Schwab 1 and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab 1 position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.

The idea behind Schwab 1 5 Year and iShares MSCI Israel 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.