Correlation Between IShares Russell and Professionally Managed

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

By analyzing existing cross correlation between iShares Russell Mid Cap and Professionally Managed Portfolios, you can compare the effects of market volatilities on IShares Russell and Professionally Managed 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 Professionally Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Professionally Managed.

Diversification Opportunities for IShares Russell and Professionally Managed

0.81

Correlation Coefficient

IShares Russell  Professionally Managed

Very poor diversification

The 3 months correlation between IShares and Professionally is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and Professionally Managed Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professionally Managed 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 Mid Cap are associated (or correlated) with Professionally Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professionally Managed has no effect on the direction of IShares Russell i.e., IShares Russell and Professionally Managed go up and down completely randomly.

Pair Corralation between IShares Russell and Professionally Managed

Considering the 90-day investment horizon iShares Russell Mid Cap is expected to generate 0.72 times more return on investment than Professionally Managed. However, iShares Russell Mid Cap is 1.4 times less risky than Professionally Managed. It trades about 0.26 of its potential returns per unit of risk. Professionally Managed Portfolios is currently generating about 0.18 per unit of risk. If you would invest  8,478  in iShares Russell Mid Cap on September 2, 2024 and sell it today you would earn a total of  1,069  from holding iShares Russell Mid Cap or generate 12.61% return on investment over 90 days.

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

iShares Russell Mid Cap  vs.  Professionally Managed Portfol

iShares Russell Mid

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Professionally Managed

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Professionally Managed Portfolios are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Professionally Managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Russell and Professionally Managed

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

The idea behind iShares Russell Mid Cap and Professionally Managed Portfolios 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 the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.