Correlation Between Charles Schwab and MSCI

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

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

Diversification Opportunities for Charles Schwab and MSCI

0.54

Correlation Coefficient

Charles Schwab  MSCI

Very weak diversification

The 3 months correlation between Charles and MSCI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Charles Schwab and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and Charles Schwab 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 The Charles Schwab are associated (or correlated) with MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of Charles Schwab i.e., Charles Schwab and MSCI go up and down completely randomly.

Pair Corralation between Charles Schwab and MSCI

Assuming the 90 days horizon The Charles Schwab is expected to generate 1.03 times more return on investment than MSCI. However, Charles Schwab is 1.03 times more volatile than MSCI Inc. It trades about 0.26 of its potential returns per unit of risk. MSCI Inc is currently generating about 0.07 per unit of risk. If you would invest  6,434  in The Charles Schwab on April 20, 2025 and sell it today you would earn a total of  1,678  from holding The Charles Schwab or generate 26.08% return on investment over 90 days.

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

The Charles Schwab  vs.  MSCI Inc

Charles Schwab

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Charles Schwab reported solid returns over the last few months and may actually be approaching a breakup point.

MSCI Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MSCI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Charles Schwab and MSCI

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

The idea behind The Charles Schwab and MSCI Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.