Correlation Between Sp Smallcap and Russell 2000
Can any of the company-specific risk be diversified away by investing in both Sp Smallcap and Russell 2000 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 Sp Smallcap and Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Smallcap 600 and Russell 2000 2x, you can compare the effects of market volatilities on Sp Smallcap and Russell 2000 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 Sp Smallcap with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Russell 2000.
Diversification Opportunities for Sp Smallcap and Russell 2000
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RYWAX and Russell is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Russell 2000 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 2x and Sp Smallcap 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 Sp Smallcap 600 are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 2x has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Russell 2000 go up and down completely randomly.
Pair Corralation between Sp Smallcap and Russell 2000
Assuming the 90 days horizon Sp Smallcap is expected to generate 1.73 times less return on investment than Russell 2000. But when comparing it to its historical volatility, Sp Smallcap 600 is 2.13 times less risky than Russell 2000. It trades about 0.07 of its potential returns per unit of risk. Russell 2000 2x is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,360 in Russell 2000 2x on September 2, 2024 and sell it today you would earn a total of 6,620 from holding Russell 2000 2x or generate 49.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Smallcap 600 vs. Russell 2000 2x
Performance |
| Timeline |
| Sp Smallcap 600 |
| Russell 2000 2x |
Sp Smallcap and Russell 2000 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Smallcap and Russell 2000
The main advantage of trading using opposite Sp Smallcap and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.| Sp Smallcap vs. Sp 500 Pure | Sp Smallcap vs. Sp Midcap 400 | Sp Smallcap vs. Sp Smallcap 600 | Sp Smallcap vs. Sp 500 Pure |
| Russell 2000 vs. Basic Materials Fund | Russell 2000 vs. Basic Materials Fund | Russell 2000 vs. Banking Fund Class | Russell 2000 vs. Basic Materials 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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