Correlation Between IShares Russell and SPDR SP
Can any of the company-specific risk be diversified away by investing in both IShares Russell and SPDR 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 IShares Russell and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 2000 and SPDR SP 600, you can compare the effects of market volatilities on IShares Russell and SPDR 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 IShares Russell with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and SPDR SP.
Diversification Opportunities for IShares Russell and SPDR SP
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 and IShares 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 iShares Russell 2000 are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of IShares Russell i.e., IShares Russell and SPDR SP go up and down completely randomly.
Pair Corralation between IShares Russell and SPDR SP
Considering the 90-day investment horizon iShares Russell 2000 is expected to generate 1.01 times more return on investment than SPDR SP. However, IShares Russell is 1.01 times more volatile than SPDR SP 600. It trades about 0.07 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.07 per unit of risk. If you would invest 15,099 in iShares Russell 2000 on August 27, 2024 and sell it today you would earn a total of 2,756 from holding iShares Russell 2000 or generate 18.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Russell 2000 vs. SPDR SP 600
Performance |
| Timeline |
| iShares Russell 2000 |
| SPDR SP 600 |
IShares Russell and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and SPDR SP
The main advantage of trading using opposite IShares Russell and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, SPDR 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 |
| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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 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.
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