Correlation Between IShares Russell and Fidelity Dividend

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

Diversification Opportunities for IShares Russell and Fidelity Dividend

ISharesFidelityDiversified AwayISharesFidelityDiversified Away100%
0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Fidelity Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Dividend ETF 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 Fidelity Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Dividend ETF has no effect on the direction of IShares Russell i.e., IShares Russell and Fidelity Dividend go up and down completely randomly.

Pair Corralation between IShares Russell and Fidelity Dividend

Considering the 90-day investment horizon iShares Russell 1000 is expected to under-perform the Fidelity Dividend. In addition to that, IShares Russell is 1.13 times more volatile than Fidelity Dividend ETF. It trades about 0.0 of its total potential returns per unit of risk. Fidelity Dividend ETF is currently generating about 0.04 per unit of volatility. If you would invest  5,067  in Fidelity Dividend ETF on September 25, 2024 and sell it today you would earn a total of  76.00  from holding Fidelity Dividend ETF or generate 1.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

iShares Russell 1000  vs.  Fidelity Dividend ETF

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0123456
JavaScript chart by amCharts 3.21.15IWD FDRR
       Timeline  
iShares Russell 1000 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec185190195200
Fidelity Dividend ETF 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Dividend ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Fidelity Dividend is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec50.55151.55252.55353.5

IShares Russell and Fidelity Dividend Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.29-1.72-1.15-0.58-0.0095610.551.121.692.262.83 0.20.40.60.81.0
JavaScript chart by amCharts 3.21.15IWD FDRR
       Returns  

Pair Trading with IShares Russell and Fidelity Dividend

The main advantage of trading using opposite IShares Russell and Fidelity Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Fidelity Dividend 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 Fidelity Dividend will offset losses from the drop in Fidelity Dividend's long position.
The idea behind iShares Russell 1000 and Fidelity Dividend ETF 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 CEOs Directory module to screen CEOs from public companies around the world.

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