Correlation Between IShares Russell and Optimize Strategy

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

Diversification Opportunities for IShares Russell and Optimize Strategy

0.98

Correlation Coefficient

IShares Russell  Optimize Strategy

Almost no diversification

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

Pair Corralation between IShares Russell and Optimize Strategy

Considering the 90-day investment horizon IShares Russell is expected to generate 1.43 times less return on investment than Optimize Strategy. But when comparing it to its historical volatility, iShares Russell 1000 is 1.27 times less risky than Optimize Strategy. It trades about 0.22 of its potential returns per unit of risk. Optimize Strategy Index is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,710  in Optimize Strategy Index on September 1, 2024 and sell it today you would earn a total of  415.00  from holding Optimize Strategy Index or generate 15.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

iShares Russell 1000  vs.  Optimize Strategy Index

iShares Russell 1000

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Optimize Strategy Index

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Optimize Strategy Index are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Optimize Strategy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Russell and Optimize Strategy

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

The idea behind iShares Russell 1000 and Optimize Strategy Index 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.