Correlation Between IShares Russell and Wilshire 5000

Can any of the company-specific risk be diversified away by investing in both IShares Russell and Wilshire 5000 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 Wilshire 5000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Russell 3000 and Wilshire 5000 Index, you can compare the effects of market volatilities on IShares Russell and Wilshire 5000 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 Wilshire 5000. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Wilshire 5000.

Diversification Opportunities for IShares Russell and Wilshire 5000

0.99

Correlation Coefficient

IShares Russell  Wilshire 5000

No risk reduction

The 3 months correlation between IShares and Wilshire is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 3000 and Wilshire 5000 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire 5000 Index 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 3000 are associated (or correlated) with Wilshire 5000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire 5000 Index has no effect on the direction of IShares Russell i.e., IShares Russell and Wilshire 5000 go up and down completely randomly.

Pair Corralation between IShares Russell and Wilshire 5000

Considering the 90-day investment horizon iShares Russell 3000 is expected to generate 0.59 times more return on investment than Wilshire 5000. However, iShares Russell 3000 is 1.7 times less risky than Wilshire 5000. It trades about 0.36 of its potential returns per unit of risk. Wilshire 5000 Index is currently generating about 0.06 per unit of risk. If you would invest  33,653  in iShares Russell 3000 on September 17, 2024 and sell it today you would earn a total of  1,056  from holding iShares Russell 3000 or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

iShares Russell 3000  vs.  Wilshire 5000 Index

iShares Russell 3000

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 3000 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wilshire 5000 Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wilshire 5000 Index are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Wilshire 5000 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Russell and Wilshire 5000

The main advantage of trading using opposite IShares Russell and Wilshire 5000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Wilshire 5000 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 Wilshire 5000 will offset losses from the drop in Wilshire 5000's long position.

The idea behind iShares Russell 3000 and Wilshire 5000 Index 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.