Correlation Between IShares Russell and Vanguard Scottsdale

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

Diversification Opportunities for IShares Russell and Vanguard Scottsdale

0.9

Correlation Coefficient

IShares Russell  Vanguard Scottsdale

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and Vanguard Scottsdale Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Scottsdale Funds 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 Vanguard Scottsdale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Scottsdale Funds has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard Scottsdale go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard Scottsdale

Considering the 90-day investment horizon iShares Russell 2000 is expected to under-perform the Vanguard Scottsdale. But the etf apears to be less risky and, when comparing its historical volatility, iShares Russell 2000 is 1.01 times less risky than Vanguard Scottsdale. The etf trades about -0.17 of its potential returns per unit of risk. The Vanguard Scottsdale Funds is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  31,129  in Vanguard Scottsdale Funds on November 28, 2024 and sell it today you would lose (3,078) from holding Vanguard Scottsdale Funds or give up 9.89% 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.  Vanguard Scottsdale Funds

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 unfluctuating 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.

Vanguard Scottsdale Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Scottsdale Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Russell and Vanguard Scottsdale

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

The idea behind iShares Russell 2000 and Vanguard Scottsdale Funds 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .