Correlation Between IShares Russell and Vanguard Value

Can any of the company-specific risk be diversified away by investing in both IShares Russell and Vanguard Value 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 Vanguard Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Russell 1000 and Vanguard Value Index, you can compare the effects of market volatilities on IShares Russell and Vanguard Value 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 Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Vanguard Value.

Diversification Opportunities for IShares Russell and Vanguard Value

0.0

Correlation Coefficient

IShares Russell  Vanguard Value

Pay attention - limited upside

The 3 months correlation between IShares and Vanguard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index 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 1000 are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard Value go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard Value

If you would invest  0.00  in Vanguard Value Index on January 29, 2024 and sell it today you would earn a total of  0.00  from holding Vanguard Value Index or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares Russell 1000  vs.  Vanguard Value Index

iShares Russell 1000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Value Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Value Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Russell and Vanguard Value

The main advantage of trading using opposite IShares Russell and Vanguard Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Vanguard Value 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 Vanguard Value will offset losses from the drop in Vanguard Value's long position.

The idea behind iShares Russell 1000 and Vanguard Value Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.