Correlation Between IShares Russell and IShares Russell

Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 IShares Russell and IShares Russell 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 iShares Russell 1000, you can compare the effects of market volatilities on IShares Russell 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 IShares Russell with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and IShares Russell.

Diversification Opportunities for IShares Russell and IShares Russell

0.45

Correlation Coefficient

IShares Russell  IShares Russell

Very weak diversification

The 3 months correlation between IShares and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap 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 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 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 IShares Russell i.e., IShares Russell and IShares Russell go up and down completely randomly.

Pair Corralation between IShares Russell and IShares Russell

Considering the 90-day investment horizon iShares Russell Mid Cap is expected to under-perform the IShares Russell. But the etf apears to be less risky and, when comparing its historical volatility, iShares Russell Mid Cap is 1.28 times less risky than IShares Russell. The etf trades about -0.02 of its potential returns per unit of risk. The iShares Russell 1000 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  37,500  in iShares Russell 1000 on September 28, 2024 and sell it today you would earn a total of  3,509  from holding iShares Russell 1000 or generate 9.36% return on investment over 90 days.

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

iShares Russell Mid Cap  vs.  iShares Russell 1000

iShares Russell Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Russell Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Russell is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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. Despite nearly unsteady basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Russell and IShares Russell

The main advantage of trading using opposite IShares Russell and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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 iShares Russell Mid Cap 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.