Correlation Between Vanguard Russell and IShares Russell

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

By analyzing existing cross correlation between Vanguard Russell 1000 and iShares Russell Top, you can compare the effects of market volatilities on Vanguard Russell 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 Vanguard Russell with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and IShares Russell.

Diversification Opportunities for Vanguard Russell and IShares Russell

0.38

Correlation Coefficient

Vanguard Russell  IShares Russell

Weak diversification

The 3 months correlation between Vanguard and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 and iShares Russell Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Top and Vanguard 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 Vanguard Russell 1000 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 Top has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and IShares Russell go up and down completely randomly.

Pair Corralation between Vanguard Russell and IShares Russell

Given the investment horizon of 90 days Vanguard Russell 1000 is expected to generate 1.65 times more return on investment than IShares Russell. However, Vanguard Russell is 1.65 times more volatile than iShares Russell Top. It trades about 0.13 of its potential returns per unit of risk. iShares Russell Top is currently generating about 0.11 per unit of risk. If you would invest  7,446  in Vanguard Russell 1000 on September 23, 2024 and sell it today you would earn a total of  3,054  from holding Vanguard Russell 1000 or generate 41.02% return on investment over 90 days.

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

Vanguard Russell 1000  vs.  iShares Russell Top

Vanguard Russell 1000

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 1000 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Russell Top

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Russell and IShares Russell

The main advantage of trading using opposite Vanguard Russell and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Russell 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 Vanguard Russell 1000 and iShares Russell Top 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.