Correlation Between Ishares Russell and Ab Small

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

By analyzing existing cross correlation between Ishares Russell 1000 and Ab Small Cap, you can compare the effects of market volatilities on Ishares Russell and Ab Small 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 Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Russell and Ab Small.

Diversification Opportunities for Ishares Russell and Ab Small

0.72

Correlation Coefficient

Ishares Russell  Ab Small

Poor diversification

The 3 months correlation between Ishares and SCYVX is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Russell 1000 and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap 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 1000 are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Ishares Russell i.e., Ishares Russell and Ab Small go up and down completely randomly.

Pair Corralation between Ishares Russell and Ab Small

Assuming the 90 days horizon Ishares Russell 1000 is expected to generate 0.64 times more return on investment than Ab Small. However, Ishares Russell 1000 is 1.57 times less risky than Ab Small. It trades about 0.11 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.04 per unit of risk. If you would invest  3,747  in Ishares Russell 1000 on October 5, 2024 and sell it today you would earn a total of  918.00  from holding Ishares Russell 1000 or generate 24.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Ishares Russell 1000  vs.  Ab Small Cap

Ishares Russell 1000

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Russell 1000 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ishares Russell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Russell and Ab Small

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

The idea behind Ishares Russell 1000 and Ab 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.