Correlation Between IShares Core and IShares Russell

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

Diversification Opportunities for IShares Core and IShares Russell

0.39

Correlation Coefficient

IShares Core  IShares Russell

Weak diversification

The 3 months correlation between IShares and IShares is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares Russell Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Top and IShares Core 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 Core SP 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 Top has no effect on the direction of IShares Core i.e., IShares Core and IShares Russell go up and down completely randomly.

Pair Corralation between IShares Core and IShares Russell

Given the investment horizon of 90 days iShares Core SP is expected to under-perform the IShares Russell. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SP is 1.52 times less risky than IShares Russell. The etf trades about -0.08 of its potential returns per unit of risk. The iShares Russell Top is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22,489  in iShares Russell Top on September 22, 2024 and sell it today you would earn a total of  1,331  from holding iShares Russell Top or generate 5.92% return on investment over 90 days.

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

iShares Core SP  vs.  iShares Russell Top

iShares Core SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Russell Top

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Top are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and IShares Russell

The main advantage of trading using opposite IShares Core and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and iShares Russell Top 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.