Correlation Between IShares Russell and FSMO

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

Diversification Opportunities for IShares Russell and FSMO

0.0

Correlation Coefficient

IShares Russell  FSMO

Pay attention - limited upside

The 3 months correlation between IShares and FSMO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and FSMO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSMO 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 FSMO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSMO has no effect on the direction of IShares Russell i.e., IShares Russell and FSMO go up and down completely randomly.

Pair Corralation between IShares Russell and FSMO

If you would invest (100.00) in FSMO on December 26, 2024 and sell it today you would earn a total of  100.00  from holding FSMO or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

iShares Russell Mid Cap  vs.  FSMO

iShares Russell Mid

Risk-Adjusted Performance

Very Weak

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

FSMO

Risk-Adjusted Performance

Very Weak

Over the last 90 days FSMO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, FSMO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Russell and FSMO

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

The idea behind iShares Russell Mid Cap and FSMO 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.