Correlation Between IShares Russell and Invesco QQQ

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

By analyzing existing cross correlation between iShares Russell 2000 and Invesco QQQ Trust, you can compare the effects of market volatilities on IShares Russell and Invesco QQQ 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 Invesco QQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Invesco QQQ.

Diversification Opportunities for IShares Russell and Invesco QQQ

0.95

Correlation Coefficient

IShares Russell  Invesco QQQ

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust 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 2000 are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of IShares Russell i.e., IShares Russell and Invesco QQQ go up and down completely randomly.

Pair Corralation between IShares Russell and Invesco QQQ

Considering the 90-day investment horizon iShares Russell 2000 is expected to under-perform the Invesco QQQ. But the etf apears to be less risky and, when comparing its historical volatility, iShares Russell 2000 is 1.17 times less risky than Invesco QQQ. The etf trades about -0.12 of its potential returns per unit of risk. The Invesco QQQ Trust is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  51,484  in Invesco QQQ Trust on December 29, 2024 and sell it today you would lose (4,590) from holding Invesco QQQ Trust or give up 8.92% of portfolio value over 90 days.

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

iShares Russell 2000  vs.  Invesco QQQ Trust

iShares Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Invesco QQQ Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco QQQ Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IShares Russell and Invesco QQQ

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

The idea behind iShares Russell 2000 and Invesco QQQ Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.