Correlation Between JPM BetaBuilders and IShares Edge

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

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

Diversification Opportunities for JPM BetaBuilders and IShares Edge

-0.72

Correlation Coefficient

JPM BetaBuilders  IShares Edge

Pay attention - limited upside

The 3 months correlation between JPM and IShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding JPM BetaBuilders Treasury and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI and JPM 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 JPM BetaBuilders Treasury are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of JPM BetaBuilders i.e., JPM BetaBuilders and IShares Edge go up and down completely randomly.

Pair Corralation between JPM BetaBuilders and IShares Edge

Assuming the 90 days trading horizon JPM BetaBuilders is expected to generate 1.17 times less return on investment than IShares Edge. But when comparing it to its historical volatility, JPM BetaBuilders Treasury is 25.05 times less risky than IShares Edge. It trades about 0.88 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  453,950  in iShares Edge MSCI on October 3, 2024 and sell it today you would earn a total of  50,850  from holding iShares Edge MSCI or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

JPM BetaBuilders Treasury  vs.  iShares Edge MSCI

JPM BetaBuilders Treasury

Risk-Adjusted Performance

43 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in JPM BetaBuilders Treasury are ranked lower than 43 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JPM BetaBuilders is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with JPM BetaBuilders and IShares Edge

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

The idea behind JPM BetaBuilders Treasury and iShares Edge MSCI 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.