Correlation Between IShares Russell and Future Fund

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

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

Diversification Opportunities for IShares Russell and Future Fund

0.88

Correlation Coefficient

IShares Russell  Future Fund

Very poor diversification

The 3 months correlation between IShares and Future is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Top and The Future Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Fund 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 Top are associated (or correlated) with Future Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Fund has no effect on the direction of IShares Russell i.e., IShares Russell and Future Fund go up and down completely randomly.

Pair Corralation between IShares Russell and Future Fund

Considering the 90-day investment horizon iShares Russell Top is expected to generate 0.98 times more return on investment than Future Fund. However, iShares Russell Top is 1.02 times less risky than Future Fund. It trades about -0.03 of its potential returns per unit of risk. The Future Fund is currently generating about -0.06 per unit of risk. If you would invest  23,843  in iShares Russell Top on October 10, 2024 and sell it today you would lose (227.00) from holding iShares Russell Top or give up 0.95% of portfolio value over 90 days.

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

iShares Russell Top  vs.  The Future Fund

iShares Russell Top

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Top are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Future Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Future Fund are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Future Fund may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares Russell and Future Fund

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

The idea behind iShares Russell Top and The Future Fund 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.