Correlation Between IShares Russell and Invesco WilderHill

Can any of the company-specific risk be diversified away by investing in both IShares Russell and Invesco WilderHill 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 Invesco WilderHill 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 Invesco WilderHill Clean, you can compare the effects of market volatilities on IShares Russell and Invesco WilderHill 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 Invesco WilderHill. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Invesco WilderHill.

Diversification Opportunities for IShares Russell and Invesco WilderHill

0.47

Correlation Coefficient

IShares Russell  Invesco WilderHill

Very weak diversification

The 3 months correlation between IShares and Invesco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and Invesco WilderHill Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco WilderHill Clean 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 Invesco WilderHill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco WilderHill Clean has no effect on the direction of IShares Russell i.e., IShares Russell and Invesco WilderHill go up and down completely randomly.

Pair Corralation between IShares Russell and Invesco WilderHill

Considering the 90-day investment horizon IShares Russell is expected to generate 13.73 times less return on investment than Invesco WilderHill. But when comparing it to its historical volatility, iShares Russell 2000 is 1.67 times less risky than Invesco WilderHill. It trades about 0.0 of its potential returns per unit of risk. Invesco WilderHill Clean is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,990  in Invesco WilderHill Clean on September 27, 2024 and sell it today you would earn a total of  86.00  from holding Invesco WilderHill Clean or generate 4.32% return on investment over 90 days.

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

iShares Russell 2000  vs.  Invesco WilderHill Clean

iShares Russell 2000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Russell is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco WilderHill Clean

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco WilderHill Clean are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental drivers, Invesco WilderHill is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Russell and Invesco WilderHill

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

The idea behind iShares Russell 2000 and Invesco WilderHill Clean 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.