Correlation Between IShares III and LG Russell
Can any of the company-specific risk be diversified away by investing in both IShares III and LG 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 IShares III and LG Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares III Public and LG Russell 2000, you can compare the effects of market volatilities on IShares III and LG 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 IShares III with a short position of LG Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares III and LG Russell.
Diversification Opportunities for IShares III and LG Russell
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and RTWO is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding iShares III Public and LG Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Russell 2000 and IShares III 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 III Public are associated (or correlated) with LG Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Russell 2000 has no effect on the direction of IShares III i.e., IShares III and LG Russell go up and down completely randomly.
Pair Corralation between IShares III and LG Russell
Assuming the 90 days trading horizon IShares III is expected to generate 4.4 times less return on investment than LG Russell. But when comparing it to its historical volatility, iShares III Public is 1.97 times less risky than LG Russell. It trades about 0.02 of its potential returns per unit of risk. LG Russell 2000 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,159 in LG Russell 2000 on September 3, 2024 and sell it today you would earn a total of 2,855 from holding LG Russell 2000 or generate 34.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares III Public vs. LG Russell 2000
Performance |
| Timeline |
| iShares III Public |
| LG Russell 2000 |
IShares III and LG Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares III and LG Russell
The main advantage of trading using opposite IShares III and LG Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares III position performs unexpectedly, LG 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 LG Russell will offset losses from the drop in LG Russell's long position.| IShares III vs. iShares Core MSCI | IShares III vs. iShares France Govt | IShares III vs. iShares Edge MSCI | IShares III vs. iShares Core FTSE |
| LG Russell vs. VanEck Multi Asset Growth | LG Russell vs. iShares III Public | LG Russell vs. iShares Core MSCI | LG Russell vs. iShares France Govt |
Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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