Correlation Between IShares Russell and Vanguard Value

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

Diversification Opportunities for IShares Russell and Vanguard Value

0.98

Correlation Coefficient

IShares Russell  Vanguard Value

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and Vanguard Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Factor 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 Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Factor has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard Value go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard Value

Considering the 90-day investment horizon iShares Russell Mid Cap is expected to generate 0.65 times more return on investment than Vanguard Value. However, iShares Russell Mid Cap is 1.55 times less risky than Vanguard Value. It trades about 0.21 of its potential returns per unit of risk. Vanguard Value Factor is currently generating about 0.13 per unit of risk. If you would invest  12,781  in iShares Russell Mid Cap on September 2, 2024 and sell it today you would earn a total of  1,234  from holding iShares Russell Mid Cap or generate 9.65% 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.  Vanguard Value Factor

iShares Russell Mid

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Value Factor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Factor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vanguard Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Russell and Vanguard Value

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

The idea behind iShares Russell Mid Cap and Vanguard Value Factor 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.