Correlation Between IShares Russell and IShares

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

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

Diversification Opportunities for IShares Russell and IShares

0.84

Correlation Coefficient

IShares Russell  IShares

Very poor diversification

The 3 months correlation between IShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 Mid Cap are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of IShares Russell i.e., IShares Russell and IShares go up and down completely randomly.

Pair Corralation between IShares Russell and IShares

If you would invest  11,433  in iShares Russell Mid Cap on September 16, 2024 and sell it today you would earn a total of  1,934  from holding iShares Russell Mid Cap or generate 16.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.54%
Values	Daily Returns

iShares Russell Mid Cap  vs.  IShares

iShares Russell Mid

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Russell reported solid returns over the last few months and may actually be approaching a breakup point.

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Russell and IShares

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

The idea behind iShares Russell Mid Cap and IShares 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.