Correlation Between LG Russell and IShares France

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

By analyzing existing cross correlation between LG Russell 2000 and iShares France Govt, you can compare the effects of market volatilities on LG Russell and IShares France 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 LG Russell with a short position of IShares France. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Russell and IShares France.

Diversification Opportunities for LG Russell and IShares France

0.47

Correlation Coefficient

LG Russell  IShares France

Very weak diversification

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

Pair Corralation between LG Russell and IShares France

Assuming the 90 days trading horizon LG Russell 2000 is expected to generate 2.93 times more return on investment than IShares France. However, LG Russell is 2.93 times more volatile than iShares France Govt. It trades about 0.05 of its potential returns per unit of risk. iShares France Govt is currently generating about 0.02 per unit of risk. If you would invest  7,783  in LG Russell 2000 on September 28, 2024 and sell it today you would earn a total of  2,443  from holding LG Russell 2000 or generate 31.39% return on investment over 90 days.

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

LG Russell 2000  vs.  iShares France Govt

LG Russell 2000

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LG Russell 2000 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LG Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares France Govt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with LG Russell and IShares France

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

The idea behind LG Russell 2000 and iShares France Govt 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 Transaction History module to view history of all your transactions and understand their impact on performance.