Correlation Between VIIX and IShares Russell

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

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

Diversification Opportunities for VIIX and IShares Russell

-0.35

Correlation Coefficient

VIIX  IShares Russell

Very good diversification

The 3 months correlation between VIIX and IShares is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding VIIX and iShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2000 and VIIX 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 VIIX are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2000 has no effect on the direction of VIIX i.e., VIIX and IShares Russell go up and down completely randomly.

Pair Corralation between VIIX and IShares Russell

Given the investment horizon of 90 days VIIX is expected to generate 63.77 times more return on investment than IShares Russell. However, VIIX is 63.77 times more volatile than iShares Russell 2000. It trades about 0.08 of its potential returns per unit of risk. iShares Russell 2000 is currently generating about 0.04 per unit of risk. If you would invest  766.00  in VIIX on October 9, 2024 and sell it today you would earn a total of  6,083  from holding VIIX or generate 794.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.38%
Values	Daily Returns

VIIX  vs.  iShares Russell 2000

VIIX

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Russell 2000

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2000 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Russell is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VIIX and IShares Russell

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

The idea behind VIIX and iShares Russell 2000 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.