Correlation Between IShares Russell and Vanguard Large

Can any of the company-specific risk be diversified away by investing in both IShares Russell and Vanguard Large 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 Large 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 Large Cap Index, you can compare the effects of market volatilities on IShares Russell and Vanguard Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Vanguard Large.

Diversification Opportunities for IShares Russell and Vanguard Large

0.95

Correlation Coefficient

IShares Russell  Vanguard Large

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard Large go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard Large

Considering the 90-day investment horizon iShares Russell 1000 is expected to under-perform the Vanguard Large. But the etf apears to be less risky and, when comparing its historical volatility, iShares Russell 1000 is 1.02 times less risky than Vanguard Large. The etf trades about -0.14 of its potential returns per unit of risk. The Vanguard Large Cap Index is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  23,843  in Vanguard Large Cap Index on February 3, 2024 and sell it today you would lose (649.00) from holding Vanguard Large Cap Index or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Russell 1000  vs.  Vanguard Large Cap Index

iShares Russell 1000

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Russell is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Russell and Vanguard Large

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

The idea behind iShares Russell 1000 and Vanguard Large Cap 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.