Correlation Between Russell 2000 and Sp Midcap
Can any of the company-specific risk be diversified away by investing in both Russell 2000 and Sp Midcap 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 Russell 2000 and Sp Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell 2000 Fund and Sp Midcap Index, you can compare the effects of market volatilities on Russell 2000 and Sp Midcap 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 Russell 2000 with a short position of Sp Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Sp Midcap.
Diversification Opportunities for Russell 2000 and Sp Midcap
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Russell and SPMIX is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 Fund and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and Russell 2000 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 Russell 2000 Fund are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of Russell 2000 i.e., Russell 2000 and Sp Midcap go up and down completely randomly.
Pair Corralation between Russell 2000 and Sp Midcap
Assuming the 90 days horizon Russell 2000 Fund is expected to generate 1.07 times more return on investment than Sp Midcap. However, Russell 2000 is 1.07 times more volatile than Sp Midcap Index. It trades about 0.1 of its potential returns per unit of risk. Sp Midcap Index is currently generating about 0.03 per unit of risk. If you would invest 4,916 in Russell 2000 Fund on September 13, 2024 and sell it today you would earn a total of 899.00 from holding Russell 2000 Fund or generate 18.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell 2000 Fund vs. Sp Midcap Index
Performance |
| Timeline |
| Russell 2000 |
| Sp Midcap Index |
Russell 2000 and Sp Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell 2000 and Sp Midcap
The main advantage of trading using opposite Russell 2000 and Sp Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 position performs unexpectedly, Sp Midcap 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 Sp Midcap will offset losses from the drop in Sp Midcap's long position.| Russell 2000 vs. Sp 500 Fund | Russell 2000 vs. Sp Midcap 400 | Russell 2000 vs. Russell 2000 2x | Russell 2000 vs. Sp 500 Pure |
| Sp Midcap vs. Shelton Emerging Markets | Sp Midcap vs. Shelton Emerging Markets | Sp Midcap vs. Shelton Funds | Sp Midcap vs. Nasdaq 100 Index Fund |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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