Correlation Between IShares SP and IShares Russell
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 IShares SP and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP Mid Cap and iShares Russell Mid Cap, you can compare the effects of market volatilities on IShares SP 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 IShares SP with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares Russell.
Diversification Opportunities for IShares SP and IShares Russell
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and iShares Russell Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Mid and IShares SP 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 SP Mid Cap 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 Mid has no effect on the direction of IShares SP i.e., IShares SP and IShares Russell go up and down completely randomly.
Pair Corralation between IShares SP and IShares Russell
Considering the 90-day investment horizon IShares SP is expected to generate 1.14 times less return on investment than IShares Russell. In addition to that, IShares SP is 1.06 times more volatile than iShares Russell Mid Cap. It trades about 0.11 of its total potential returns per unit of risk. iShares Russell Mid Cap is currently generating about 0.14 per unit of volatility. If you would invest 9,545 in iShares Russell Mid Cap on August 24, 2024 and sell it today you would earn a total of 3,684 from holding iShares Russell Mid Cap or generate 38.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP Mid Cap vs. iShares Russell Mid Cap
Performance |
| Timeline |
| iShares SP Mid |
| iShares Russell Mid |
IShares SP and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares Russell
The main advantage of trading using opposite IShares SP and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. First Trust Small | IShares SP vs. First Trust Mid | IShares SP vs. First Trust Small | IShares SP vs. First Trust Multi |
| IShares Russell vs. JPMorgan Fundamental Data | IShares Russell vs. Vanguard Mid Cap Index | IShares Russell vs. SPDR SP 400 | IShares Russell vs. SPDR SP 400 |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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