Correlation Between IShares Russell and Capital Group

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

Diversification Opportunities for IShares Russell and Capital Group

0.98

Correlation Coefficient

IShares Russell  Capital Group

Almost no diversification

The 3 months correlation between IShares and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Capital Group Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Core 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Core has no effect on the direction of IShares Russell i.e., IShares Russell and Capital Group go up and down completely randomly.

Pair Corralation between IShares Russell and Capital Group

Considering the 90-day investment horizon iShares Russell 1000 is expected to under-perform the Capital Group. But the etf apears to be less risky and, when comparing its historical volatility, iShares Russell 1000 is 1.01 times less risky than Capital Group. The etf trades about -0.05 of its potential returns per unit of risk. The Capital Group Core is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,505  in Capital Group Core on September 23, 2024 and sell it today you would earn a total of  22.00  from holding Capital Group Core or generate 0.63% return on investment over 90 days.

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

iShares Russell 1000  vs.  Capital Group Core

iShares Russell 1000

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Russell is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Capital Group Core

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Russell and Capital Group

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

The idea behind iShares Russell 1000 and Capital Group Core 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.