Correlation Between IShares Russell and American Century

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

Diversification Opportunities for IShares Russell and American Century

0.93

Correlation Coefficient

IShares Russell  American Century

Almost no diversification

The 3 months correlation between IShares and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and American Century STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century STOXX 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century STOXX has no effect on the direction of IShares Russell i.e., IShares Russell and American Century go up and down completely randomly.

Pair Corralation between IShares Russell and American Century

Considering the 90-day investment horizon iShares Russell 1000 is expected to generate 1.12 times more return on investment than American Century. However, IShares Russell is 1.12 times more volatile than American Century STOXX. It trades about -0.24 of its potential returns per unit of risk. American Century STOXX is currently generating about -0.43 per unit of risk. If you would invest  17,824  in iShares Russell 1000 on February 1, 2024 and sell it today you would lose (674.00) from holding iShares Russell 1000 or give up 3.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

iShares Russell 1000  vs.  American Century STOXX

iShares Russell 1000

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

American Century STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Russell and American Century

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

The idea behind iShares Russell 1000 and American Century STOXX 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.