Correlation Between Vanguard Russell and IShares SP

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

By analyzing existing cross correlation between Vanguard Russell 1000 and iShares SP 500, you can compare the effects of market volatilities on Vanguard Russell and IShares SP 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 Vanguard Russell with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and IShares SP.

Diversification Opportunities for Vanguard Russell and IShares SP

0.93

Correlation Coefficient

Vanguard Russell  IShares SP

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and Vanguard 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 Vanguard Russell 1000 are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and IShares SP go up and down completely randomly.

Pair Corralation between Vanguard Russell and IShares SP

Given the investment horizon of 90 days Vanguard Russell is expected to generate 1.52 times less return on investment than IShares SP. But when comparing it to its historical volatility, Vanguard Russell 1000 is 1.36 times less risky than IShares SP. It trades about 0.06 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,479  in iShares SP 500 on February 22, 2024 and sell it today you would earn a total of  237.00  from holding iShares SP 500 or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.62%
Values	Daily Returns

Vanguard Russell 1000  vs.  iShares SP 500

Vanguard Russell 1000

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 1000 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Russell is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares SP 500

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard Russell and IShares SP

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

The idea behind Vanguard Russell 1000 and iShares SP 500 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.