Correlation Between JPMorgan BetaBuilders and First Trust

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

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

Diversification Opportunities for JPMorgan BetaBuilders and First Trust

0.48

Correlation Coefficient

JPMorgan BetaBuilders  First Trust

Very weak diversification

The 3 months correlation between JPMorgan and First is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan BetaBuilders Canada and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and JPMorgan BetaBuilders 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 JPMorgan BetaBuilders Canada are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust TCW has no effect on the direction of JPMorgan BetaBuilders i.e., JPMorgan BetaBuilders and First Trust go up and down completely randomly.

Pair Corralation between JPMorgan BetaBuilders and First Trust

Given the investment horizon of 90 days JPMorgan BetaBuilders Canada is expected to under-perform the First Trust. In addition to that, JPMorgan BetaBuilders is 2.33 times more volatile than First Trust TCW. It trades about -0.05 of its total potential returns per unit of risk. First Trust TCW is currently generating about -0.03 per unit of volatility. If you would invest  4,312  in First Trust TCW on October 7, 2024 and sell it today you would lose (21.00) from holding First Trust TCW or give up 0.49% of portfolio value over 90 days.

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

JPMorgan BetaBuilders Canada  vs.  First Trust TCW

JPMorgan BetaBuilders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan BetaBuilders Canada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JPMorgan BetaBuilders and First Trust

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

The idea behind JPMorgan BetaBuilders Canada and First Trust TCW 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.