Correlation Between IShares SP and LG Russell

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

By analyzing existing cross correlation between iShares SP 500 and LG Russell 2000, you can compare the effects of market volatilities on IShares SP and LG 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 SP with a short position of LG Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and LG Russell.

Diversification Opportunities for IShares SP and LG Russell

0.98

Correlation Coefficient

IShares SP  LG Russell

Almost no diversification

The 3 months correlation between IShares and RTWO is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and LG Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Russell 2000 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 500 are associated (or correlated) with LG Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Russell 2000 has no effect on the direction of IShares SP i.e., IShares SP and LG Russell go up and down completely randomly.

Pair Corralation between IShares SP and LG Russell

Assuming the 90 days trading horizon iShares SP 500 is expected to generate 0.87 times more return on investment than LG Russell. However, iShares SP 500 is 1.14 times less risky than LG Russell. It trades about -0.13 of its potential returns per unit of risk. LG Russell 2000 is currently generating about -0.15 per unit of risk. If you would invest  5,648  in iShares SP 500 on December 30, 2024 and sell it today you would lose (509.00) from holding iShares SP 500 or give up 9.01% 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 500  vs.  LG Russell 2000

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic 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.

LG Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic 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.

Pair Trading with IShares SP and LG Russell

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

The idea behind iShares SP 500 and LG Russell 2000 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.