Correlation Between IShares Russell and Vanguard Total

Can any of the company-specific risk be diversified away by investing in both IShares Russell and Vanguard Total 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 Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Russell Top and Vanguard Total Stock, you can compare the effects of market volatilities on IShares Russell and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Vanguard Total.

Diversification Opportunities for IShares Russell and Vanguard Total

0.99

Correlation Coefficient

IShares Russell  Vanguard Total

No risk reduction

The 3 months correlation between IShares and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Top and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Top are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard Total go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard Total

Considering the 90-day investment horizon iShares Russell Top is expected to generate 1.0 times more return on investment than Vanguard Total. However, iShares Russell Top is 1.0 times less risky than Vanguard Total. It trades about 0.13 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.12 per unit of risk. If you would invest  8,734  in iShares Russell Top on September 23, 2024 and sell it today you would earn a total of  5,866  from holding iShares Russell Top or generate 67.16% 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 Top  vs.  Vanguard Total Stock

iShares Russell Top

Risk-Adjusted Performance

7 of 100

OK

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

Vanguard Total Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Russell and Vanguard Total

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

The idea behind iShares Russell Top and Vanguard Total Stock 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.