Correlation Between SP Smallcap and Russell 2000

By analyzing existing cross correlation between SP Smallcap Growth and Russell 2000 Growth, you can compare the effects of market volatilities on SP Smallcap and Russell 2000 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 SP Smallcap with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Smallcap and Russell 2000.

Specify exactly 2 symbols:

Can any of the company-specific risk be diversified away by investing in both SP Smallcap and Russell 2000 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 SP Smallcap and Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for SP Smallcap and Russell 2000

0.76
  Correlation Coefficient
SP Smallcap Growth
Russell 2000 Growth

Poor diversification

The 3 months correlation between SP Smallcap and Russell is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SP Smallcap Growth and Russell 2000 Growth in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 Growth and SP Smallcap 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 SP Smallcap Growth are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 Growth has no effect on the direction of SP Smallcap i.e., SP Smallcap and Russell 2000 go up and down completely randomly.

Pair Corralation between SP Smallcap and Russell 2000

Given the investment horizon of 90 days SP Smallcap Growth is expected to generate 0.81 times more return on investment than Russell 2000. However, SP Smallcap Growth is 1.24 times less risky than Russell 2000. It trades about 0.01 of its potential returns per unit of risk. Russell 2000 Growth is currently generating about -0.1 per unit of risk. If you would invest  8,897  in SP Smallcap Growth on October 18, 2021 and sell it today you would earn a total of  36.00  from holding SP Smallcap Growth or generate 0.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

SP Smallcap Growth  vs.  Russell 2000 Growth

 Performance (%) 
      Timeline 
SP Smallcap Growth 
SP Smallcap Performance
0 of 100
Over the last 90 days SP Smallcap Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SP Smallcap is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SP Smallcap Price Channel

Russell 2000 Growth 
Russell Performance
0 of 100
Over the last 90 days Russell 2000 Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Russell Price Channel

SP Smallcap and Russell 2000 Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with SP Smallcap and Russell 2000

The main advantage of trading using opposite SP Smallcap and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Smallcap position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.

SP Smallcap Growth

Pair trading matchups for SP Smallcap

The idea behind SP Smallcap Growth and Russell 2000 Growth 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

Other Complementary Tools

Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go