Correlation Between IShares SP and Royce Quant

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

By analyzing existing cross correlation between iShares SP Small Cap and Royce Quant Small Cap, you can compare the effects of market volatilities on IShares SP and Royce Quant 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 SP with a short position of Royce Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Royce Quant.

Diversification Opportunities for IShares SP and Royce Quant

1.0

Correlation Coefficient

IShares SP  Royce Quant

No risk reduction

The 3 months correlation between IShares and Royce is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and Royce Quant Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Quant Small and IShares SP 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 SP Small Cap are associated (or correlated) with Royce Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Quant Small has no effect on the direction of IShares SP i.e., IShares SP and Royce Quant go up and down completely randomly.

Pair Corralation between IShares SP and Royce Quant

Considering the 90-day investment horizon iShares SP Small Cap is expected to under-perform the Royce Quant. In addition to that, IShares SP is 1.07 times more volatile than Royce Quant Small Cap. It trades about -0.15 of its total potential returns per unit of risk. Royce Quant Small Cap is currently generating about -0.14 per unit of volatility. If you would invest  4,236  in Royce Quant Small Cap on December 28, 2024 and sell it today you would lose (374.00) from holding Royce Quant Small Cap or give up 8.83% of portfolio value over 90 days.

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

iShares SP Small Cap  vs.  Royce Quant Small Cap

iShares SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's forward-looking indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Royce Quant Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Quant Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with IShares SP and Royce Quant

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

The idea behind iShares SP Small Cap and Royce Quant Small Cap 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..