Correlation Between IShares Russell and ETF Series
Can any of the company-specific risk be diversified away by investing in both IShares Russell and ETF Series 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 ETF Series 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 ETF Series Solutions, you can compare the effects of market volatilities on IShares Russell and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and ETF Series.
Diversification Opportunities for IShares Russell and ETF Series
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and ETF is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of IShares Russell i.e., IShares Russell and ETF Series go up and down completely randomly.
Pair Corralation between IShares Russell and ETF Series
Considering the 90-day investment horizon iShares Russell 2000 is expected to generate 1.49 times more return on investment than ETF Series. However, IShares Russell is 1.49 times more volatile than ETF Series Solutions. It trades about 0.21 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.28 per unit of risk. If you would invest 16,675 in iShares Russell 2000 on August 30, 2024 and sell it today you would earn a total of 1,339 from holding iShares Russell 2000 or generate 8.03% 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. ETF Series Solutions
Performance |
| Timeline |
| iShares Russell 2000 |
| ETF Series Solutions |
IShares Russell and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and ETF Series
The main advantage of trading using opposite IShares Russell and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' 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 |
| ETF Series vs. AAM Low Duration | ETF Series vs. 6 Meridian Low | ETF Series vs. Exchange Listed Funds | ETF Series vs. 6 Meridian Mega |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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