Correlation Between IShares Core and IShares Russell
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SP and iShares Russell 3000, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares Russell.
Diversification Opportunities for IShares Core and IShares Russell
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares Russell 3000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 3000 and IShares Core 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 Core SP 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 3000 has no effect on the direction of IShares Core i.e., IShares Core and IShares Russell go up and down completely randomly.
Pair Corralation between IShares Core and IShares Russell
Considering the 90-day investment horizon IShares Core is expected to generate 1.37 times less return on investment than IShares Russell. But when comparing it to its historical volatility, iShares Core SP is 1.05 times less risky than IShares Russell. It trades about 0.18 of its potential returns per unit of risk. iShares Russell 3000 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 33,055 in iShares Russell 3000 on August 31, 2024 and sell it today you would earn a total of 1,579 from holding iShares Russell 3000 or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares Core SP vs. iShares Russell 3000
Performance |
| Timeline |
| iShares Core SP |
| iShares Russell 3000 |
IShares Core and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares Russell
The main advantage of trading using opposite IShares Core and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP 500 | IShares Core vs. iShares Russell 2000 |
| IShares Russell vs. Vanguard Total Stock | IShares Russell vs. SPDR SP 500 | IShares Russell vs. iShares Core SP | IShares Russell vs. Vanguard Dividend Appreciation |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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