Correlation Between VIIX and IShares Russell

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

By analyzing existing cross correlation between VIIX and iShares Russell 2000, you can compare the effects of market volatilities on VIIX and IShares Russell 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 VIIX with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIIX and IShares Russell.

Diversification Opportunities for VIIX and IShares Russell

-0.76

Correlation Coefficient

VIIX  IShares Russell

Pay attention - limited upside

The 3 months correlation between VIIX and IShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding VIIX and iShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2000 and VIIX 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 VIIX are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2000 has no effect on the direction of VIIX i.e., VIIX and IShares Russell go up and down completely randomly.

Pair Corralation between VIIX and IShares Russell

If you would invest  28,756  in iShares Russell 2000 on August 22, 2024 and sell it today you would earn a total of  1,123  from holding iShares Russell 2000 or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.35%
Values	Daily Returns

VIIX  vs.  iShares Russell 2000

VIIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, VIIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Russell 2000

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2000 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with VIIX and IShares Russell

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

The idea behind VIIX and iShares Russell 2000 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.