Correlation Between IShares MSCI and IShares Russell

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

Diversification Opportunities for IShares MSCI and IShares Russell

-0.12

Correlation Coefficient

IShares MSCI  IShares Russell

Good diversification

The 3 months correlation between IShares and IShares is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging 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 MSCI 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 MSCI Emerging 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 MSCI i.e., IShares MSCI and IShares Russell go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Russell

Considering the 90-day investment horizon iShares MSCI Emerging is expected to under-perform the IShares Russell. In addition to that, IShares MSCI is 1.33 times more volatile than iShares Russell 1000. It trades about -0.11 of its total potential returns per unit of risk. iShares Russell 1000 is currently generating about -0.13 per unit of volatility. If you would invest  19,381  in iShares Russell 1000 on October 7, 2024 and sell it today you would lose (730.00) from holding iShares Russell 1000 or give up 3.77% of portfolio value over 90 days.

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

iShares MSCI Emerging  vs.  iShares Russell 1000

iShares MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares Russell 1000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and IShares Russell

The main advantage of trading using opposite IShares MSCI and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI Emerging 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.