Correlation Between IShares Russell and Vanguard Balanced

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

Diversification Opportunities for IShares Russell and Vanguard Balanced

0.87

Correlation Coefficient

IShares Russell  Vanguard Balanced

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Vanguard Balanced Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Balanced 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Balanced Index has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard Balanced go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard Balanced

Considering the 90-day investment horizon iShares Russell 1000 is expected to generate 1.39 times more return on investment than Vanguard Balanced. However, IShares Russell is 1.39 times more volatile than Vanguard Balanced Index. It trades about 0.12 of its potential returns per unit of risk. Vanguard Balanced Index is currently generating about 0.07 per unit of risk. If you would invest  20,149  in iShares Russell 1000 on September 16, 2025 and sell it today you would earn a total of  1,061  from holding iShares Russell 1000 or generate 5.27% return on investment over 90 days.

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

iShares Russell 1000  vs.  Vanguard Balanced Index

iShares Russell 1000

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 9 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Balanced Index

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Index are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Russell and Vanguard Balanced

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

The idea behind iShares Russell 1000 and Vanguard Balanced 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.