Correlation Between Vanguard Russell and IShares SP

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

By analyzing existing cross correlation between Vanguard Russell 2000 and iShares SP Small Cap, you can compare the effects of market volatilities on Vanguard Russell and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and IShares SP.

Diversification Opportunities for Vanguard Russell and IShares SP

0.99

Correlation Coefficient

Vanguard Russell  IShares SP

No risk reduction

The 3 months correlation between Vanguard and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small 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 2000 are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and IShares SP go up and down completely randomly.

Pair Corralation between Vanguard Russell and IShares SP

Given the investment horizon of 90 days Vanguard Russell 2000 is expected to under-perform the IShares SP. In addition to that, Vanguard Russell is 1.16 times more volatile than iShares SP Small Cap. It trades about -0.1 of its total potential returns per unit of risk. iShares SP Small Cap is currently generating about -0.12 per unit of volatility. If you would invest  13,610  in iShares SP Small Cap on December 21, 2024 and sell it today you would lose (1,143) from holding iShares SP Small Cap or give up 8.4% of portfolio value over 90 days.

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

Vanguard Russell 2000  vs.  iShares SP Small Cap

Vanguard Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

iShares SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's forward-looking indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Vanguard Russell and IShares SP

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

The idea behind Vanguard Russell 2000 and iShares SP Small Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.