Correlation Between IShares MSCI and JPMorgan BetaBuilders

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

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

Diversification Opportunities for IShares MSCI and JPMorgan BetaBuilders

0.83

Correlation Coefficient

IShares MSCI  JPMorgan BetaBuilders

Very poor diversification

The 3 months correlation between IShares and JPMorgan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI All and JPMorgan BetaBuilders Develope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and IShares MSCI 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 MSCI All are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders has no effect on the direction of IShares MSCI i.e., IShares MSCI and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between IShares MSCI and JPMorgan BetaBuilders

Given the investment horizon of 90 days iShares MSCI All is expected to generate 1.3 times more return on investment than JPMorgan BetaBuilders. However, IShares MSCI is 1.3 times more volatile than JPMorgan BetaBuilders Developed. It trades about 0.06 of its potential returns per unit of risk. JPMorgan BetaBuilders Developed is currently generating about 0.07 per unit of risk. If you would invest  7,142  in iShares MSCI All on September 4, 2024 and sell it today you would earn a total of  309.00  from holding iShares MSCI All or generate 4.33% return on investment over 90 days.

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

iShares MSCI All  vs.  JPMorgan BetaBuilders Develope

iShares MSCI All

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI All are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

JPMorgan BetaBuilders

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders Developed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, JPMorgan BetaBuilders 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 MSCI and JPMorgan BetaBuilders

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

The idea behind iShares MSCI All and JPMorgan BetaBuilders Developed 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.