Correlation Between IShares Russell and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both IShares Russell and NYSE Composite 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 NYSE Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 2000 and NYSE Composite, you can compare the effects of market volatilities on IShares Russell and NYSE Composite 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 NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and NYSE Composite.
Diversification Opportunities for IShares Russell and NYSE Composite
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and NYSE is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 2000 are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of IShares Russell i.e., IShares Russell and NYSE Composite go up and down completely randomly.
Pair Corralation between IShares Russell and NYSE Composite
Considering the 90-day investment horizon iShares Russell 2000 is expected to under-perform the NYSE Composite. In addition to that, IShares Russell is 1.85 times more volatile than NYSE Composite. It trades about -0.08 of its total potential returns per unit of risk. NYSE Composite is currently generating about -0.12 per unit of volatility. If you would invest 1,812,226 in NYSE Composite on February 5, 2024 and sell it today you would lose (32,437) from holding NYSE Composite or give up 1.79% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Russell 2000 vs. NYSE Composite
Performance |
Timeline |
IShares Russell and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
iShares Russell 2000
Pair trading matchups for IShares Russell
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with IShares Russell and NYSE Composite
The main advantage of trading using opposite IShares Russell and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell 1000 |
NYSE Composite vs. Bridgford Foods | NYSE Composite vs. SunOpta | NYSE Composite vs. Where Food Comes | NYSE Composite vs. Sligro Food Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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