Correlation Between IShares Russell and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares Russell and IShares MSCI 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 IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell Mid Cap and iShares MSCI EAFE, you can compare the effects of market volatilities on IShares Russell and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and IShares MSCI.
Diversification Opportunities for IShares Russell and IShares MSCI
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 Mid Cap are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of IShares Russell i.e., IShares Russell and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares Russell and IShares MSCI
Considering the 90-day investment horizon iShares Russell Mid Cap is expected to generate 0.88 times more return on investment than IShares MSCI. However, iShares Russell Mid Cap is 1.14 times less risky than IShares MSCI. It trades about 0.12 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.01 per unit of risk. If you would invest 12,131 in iShares Russell Mid Cap on August 24, 2024 and sell it today you would earn a total of 1,607 from holding iShares Russell Mid Cap or generate 13.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Russell Mid Cap vs. iShares MSCI EAFE
Performance |
| Timeline |
| iShares Russell Mid |
| iShares MSCI EAFE |
IShares Russell and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and IShares MSCI
The main advantage of trading using opposite IShares Russell and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| IShares Russell vs. First Trust Small | IShares Russell vs. First Trust Mid | IShares Russell vs. First Trust Small | IShares Russell vs. First Trust Large |
| IShares MSCI vs. Dimensional ETF Trust | IShares MSCI vs. Vanguard Small Cap Index | IShares MSCI vs. First Trust Multi Manager | IShares MSCI 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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