Correlation Between IShares Dow and IShares Russell
Can any of the company-specific risk be diversified away by investing in both IShares Dow 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 Dow 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 Dow Jones and iShares Russell 3000, you can compare the effects of market volatilities on IShares Dow 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 Dow with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Dow and IShares Russell.
Diversification Opportunities for IShares Dow 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 Dow Jones 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 Dow 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 Dow Jones 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 Dow i.e., IShares Dow and IShares Russell go up and down completely randomly.
Pair Corralation between IShares Dow and IShares Russell
Considering the 90-day investment horizon iShares Dow Jones is expected to generate about the same return on investment as iShares Russell 3000. But, iShares Dow Jones is 1.01 times less risky than IShares Russell. It trades about 0.21 of its potential returns per unit of risk. iShares Russell 3000 is currently generating about 0.21 per unit of risk. If you would invest 33,373 in iShares Russell 3000 on November 3, 2024 and sell it today you would earn a total of 1,281 from holding iShares Russell 3000 or generate 3.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Dow Jones vs. iShares Russell 3000
Performance |
| Timeline |
| iShares Dow Jones |
| iShares Russell 3000 |
IShares Dow and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Dow and IShares Russell
The main advantage of trading using opposite IShares Dow and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Dow 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 Dow vs. iShares Russell 3000 | IShares Dow vs. iShares Industrials ETF | IShares Dow vs. iShares Consumer Discretionary | IShares Dow vs. iShares Consumer Staples |
| IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Dow Jones | IShares Russell vs. iShares SP Mid Cap | IShares Russell vs. iShares SP Mid 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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