Correlation Between IShares Russell and IShares Russell
Can any of the company-specific risk be diversified away by investing in both IShares Russell and IShares Russell 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 Russell and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 2000 and iShares Russell 1000, you can compare the effects of market volatilities on IShares Russell and IShares Russell 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 Russell with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and IShares Russell.
Diversification Opportunities for IShares Russell and IShares Russell
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and iShares Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 1000 and IShares Russell 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 Russell 2000 are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 1000 has no effect on the direction of IShares Russell i.e., IShares Russell and IShares Russell go up and down completely randomly.
Pair Corralation between IShares Russell and IShares Russell
Considering the 90-day investment horizon iShares Russell 2000 is expected to under-perform the IShares Russell. In addition to that, IShares Russell is 1.58 times more volatile than iShares Russell 1000. It trades about -0.13 of its total potential returns per unit of risk. iShares Russell 1000 is currently generating about -0.14 per unit of volatility. If you would invest 17,578 in iShares Russell 1000 on January 24, 2024 and sell it today you would lose (380.00) from holding iShares Russell 1000 or give up 2.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Russell 2000 vs. iShares Russell 1000
Performance |
| Timeline |
| iShares Russell 2000 |
| iShares Russell 1000 |
IShares Russell and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and IShares Russell
The main advantage of trading using opposite IShares Russell and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.| IShares Russell vs. First Trust RiverFront | IShares Russell vs. First Trust RiverFront | IShares Russell vs. Arrow DWA Tactical | IShares Russell vs. First Trust Developed |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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