Correlation Between IShares Russell and Sonora Resources

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

Diversification Opportunities for IShares Russell and Sonora Resources

0.97

Correlation Coefficient

IShares Russell  Sonora Resources

Almost no diversification

The 3 months correlation between IShares and Sonora is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and Sonora Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonora Resources Corp 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 Sonora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonora Resources Corp has no effect on the direction of IShares Russell i.e., IShares Russell and Sonora Resources go up and down completely randomly.

Pair Corralation between IShares Russell and Sonora Resources

Considering the 90-day investment horizon iShares Russell Mid Cap is expected to generate 0.95 times more return on investment than Sonora Resources. However, iShares Russell Mid Cap is 1.05 times less risky than Sonora Resources. It trades about 0.26 of its potential returns per unit of risk. Sonora Resources Corp is currently generating about 0.2 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Russell Mid Cap  vs.  Sonora Resources Corp

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.

Sonora Resources Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonora Resources Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Sonora Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Russell and Sonora Resources

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

The idea behind iShares Russell Mid Cap and Sonora Resources Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.