Correlation Between IShares Russell and Pacer Small
Can any of the company-specific risk be diversified away by investing in both IShares Russell and Pacer Small 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 Pacer Small 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 Pacer Small Cap, you can compare the effects of market volatilities on IShares Russell and Pacer Small 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 Pacer Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Pacer Small.
Diversification Opportunities for IShares Russell and Pacer Small
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Pacer is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap 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 Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of IShares Russell i.e., IShares Russell and Pacer Small go up and down completely randomly.
Pair Corralation between IShares Russell and Pacer Small
Considering the 90-day investment horizon iShares Russell 2000 is expected to generate 1.1 times more return on investment than Pacer Small. However, IShares Russell is 1.1 times more volatile than Pacer Small Cap. It trades about 0.17 of its potential returns per unit of risk. Pacer Small Cap is currently generating about 0.14 per unit of risk. If you would invest 28,400 in iShares Russell 2000 on August 30, 2024 and sell it today you would earn a total of 2,905 from holding iShares Russell 2000 or generate 10.23% 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. Pacer Small Cap
Performance |
| Timeline |
| iShares Russell 2000 |
| Pacer Small Cap |
IShares Russell and Pacer Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and Pacer Small
The main advantage of trading using opposite IShares Russell and Pacer Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Pacer Small 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 Pacer Small will offset losses from the drop in Pacer Small's long position.| IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell 1000 |
| Pacer Small vs. Pacer Large Cap | Pacer Small vs. VanEck Robotics ETF | Pacer Small vs. Pacer Small Cap | Pacer Small vs. Pacer Cash Cows |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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