Correlation Between Short Real and Russell 2000

Can any of the company-specific risk be diversified away by investing in both Short Real and Russell 2000 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 Short Real and Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Short Real Estate and Russell 2000 15x, you can compare the effects of market volatilities on Short Real and Russell 2000 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 Short Real with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Real and Russell 2000.

Diversification Opportunities for Short Real and Russell 2000

-0.27

Correlation Coefficient

Short Real  Russell 2000

Very good diversification

The 3 months correlation between Short and Russell is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Short Real Estate and Russell 2000 15x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 15x and Short Real 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 Short Real Estate are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 15x has no effect on the direction of Short Real i.e., Short Real and Russell 2000 go up and down completely randomly.

Pair Corralation between Short Real and Russell 2000

Assuming the 90 days horizon Short Real Estate is expected to under-perform the Russell 2000. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Real Estate is 1.93 times less risky than Russell 2000. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Russell 2000 15x is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,118  in Russell 2000 15x on October 4, 2024 and sell it today you would earn a total of  547.00  from holding Russell 2000 15x or generate 10.69% return on investment over 90 days.

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

Short Real Estate  vs.  Russell 2000 15x

Short Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Short Real Estate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Russell 2000 15x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Russell 2000 15x has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Russell 2000 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Real and Russell 2000

The main advantage of trading using opposite Short Real and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Real position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.

The idea behind Short Real Estate and Russell 2000 15x 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.