Correlation Between Rational Defensive and Ishares Russell

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

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

Diversification Opportunities for Rational Defensive and Ishares Russell

0.95

Correlation Coefficient

Rational Defensive  Ishares Russell

Almost no diversification

The 3 months correlation between Rational and Ishares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth 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 Rational Defensive 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 Rational Defensive Growth 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 Rational Defensive i.e., Rational Defensive and Ishares Russell go up and down completely randomly.

Pair Corralation between Rational Defensive and Ishares Russell

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.33 times more return on investment than Ishares Russell. However, Rational Defensive is 1.33 times more volatile than Ishares Russell 1000. It trades about 0.07 of its potential returns per unit of risk. Ishares Russell 1000 is currently generating about -0.08 per unit of risk. If you would invest  3,968  in Rational Defensive Growth on September 23, 2024 and sell it today you would earn a total of  62.00  from holding Rational Defensive Growth or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Rational Defensive Growth  vs.  Ishares Russell 1000

Rational Defensive Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ishares Russell 1000

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Russell 1000 are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ishares Russell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Defensive and Ishares Russell

The main advantage of trading using opposite Rational Defensive and Ishares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive 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.

The idea behind Rational Defensive Growth and Ishares Russell 1000 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.