Correlation Between IShares Russell and Alger 35

Can any of the company-specific risk be diversified away by investing in both IShares Russell and Alger 35 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 Alger 35 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 Alger 35 ETF, you can compare the effects of market volatilities on IShares Russell and Alger 35 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 Alger 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Alger 35.

Diversification Opportunities for IShares Russell and Alger 35

0.83

Correlation Coefficient

IShares Russell  Alger 35

Very poor diversification

The 3 months correlation between IShares and Alger is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Alger 35 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger 35 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 Alger 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger 35 ETF has no effect on the direction of IShares Russell i.e., IShares Russell and Alger 35 go up and down completely randomly.

Pair Corralation between IShares Russell and Alger 35

Considering the 90-day investment horizon IShares Russell is expected to generate 1.45 times less return on investment than Alger 35. But when comparing it to its historical volatility, iShares Russell 1000 is 2.26 times less risky than Alger 35. It trades about 0.08 of its potential returns per unit of risk. Alger 35 ETF is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,738  in Alger 35 ETF on November 19, 2024 and sell it today you would earn a total of  49.50  from holding Alger 35 ETF or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

iShares Russell 1000  vs.  Alger 35 ETF

iShares Russell 1000

Risk-Adjusted Performance

OK

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 nearly unsteady basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Alger 35 ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger 35 ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Alger 35 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Russell and Alger 35

The main advantage of trading using opposite IShares Russell and Alger 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Alger 35 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 Alger 35 will offset losses from the drop in Alger 35's long position.

The idea behind iShares Russell 1000 and Alger 35 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.