Correlation Between IShares Russell and 6 Meridian

Can any of the company-specific risk be diversified away by investing in both IShares Russell and 6 Meridian 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 6 Meridian 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 6 Meridian Mega, you can compare the effects of market volatilities on IShares Russell and 6 Meridian 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 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and 6 Meridian.

Diversification Opportunities for IShares Russell and 6 Meridian

0.56

Correlation Coefficient

IShares Russell  6 Meridian

Very weak diversification

The 3 months correlation between IShares and SIXA is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and 6 Meridian Mega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Mega 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 6 Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 6 Meridian Mega has no effect on the direction of IShares Russell i.e., IShares Russell and 6 Meridian go up and down completely randomly.

Pair Corralation between IShares Russell and 6 Meridian

Considering the 90-day investment horizon IShares Russell is expected to generate 1.91 times less return on investment than 6 Meridian. In addition to that, IShares Russell is 1.12 times more volatile than 6 Meridian Mega. It trades about 0.04 of its total potential returns per unit of risk. 6 Meridian Mega is currently generating about 0.08 per unit of volatility. If you would invest  4,476  in 6 Meridian Mega on December 25, 2024 and sell it today you would earn a total of  142.00  from holding 6 Meridian Mega or generate 3.17% return on investment over 90 days.

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

iShares Russell 1000  vs.  6 Meridian Mega

iShares Russell 1000

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

6 Meridian Mega

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 6 Meridian Mega are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 6 Meridian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Russell and 6 Meridian

The main advantage of trading using opposite IShares Russell and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, 6 Meridian 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 6 Meridian will offset losses from the drop in 6 Meridian's long position.

The idea behind iShares Russell 1000 and 6 Meridian Mega 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.