Correlation Between IShares Russell and WisdomTree Total

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

By analyzing existing cross correlation between iShares Russell 1000 and WisdomTree Total Dividend, you can compare the effects of market volatilities on IShares Russell and WisdomTree Total 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 WisdomTree Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and WisdomTree Total.

Diversification Opportunities for IShares Russell and WisdomTree Total

0.99

Correlation Coefficient

IShares Russell  WisdomTree Total

No risk reduction

The 3 months correlation between IShares and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and WisdomTree Total Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Total Dividend 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 1000 are associated (or correlated) with WisdomTree Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Total Dividend has no effect on the direction of IShares Russell i.e., IShares Russell and WisdomTree Total go up and down completely randomly.

Pair Corralation between IShares Russell and WisdomTree Total

Considering the 90-day investment horizon iShares Russell 1000 is expected to generate 1.04 times more return on investment than WisdomTree Total. However, IShares Russell is 1.04 times more volatile than WisdomTree Total Dividend. It trades about 0.15 of its potential returns per unit of risk. WisdomTree Total Dividend is currently generating about 0.15 per unit of risk. If you would invest  18,730  in iShares Russell 1000 on August 30, 2024 and sell it today you would earn a total of  1,202  from holding iShares Russell 1000 or generate 6.42% return on investment over 90 days.

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

iShares Russell 1000  vs.  WisdomTree Total Dividend

iShares Russell 1000

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in December 2024.

WisdomTree Total Dividend

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days WisdomTree Total Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, WisdomTree Total may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Russell and WisdomTree Total

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

The idea behind iShares Russell 1000 and WisdomTree Total Dividend 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.