Correlation Between JPM BetaBuilders and JPM China

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

Diversification Opportunities for JPM BetaBuilders and JPM China

0.57

Correlation Coefficient

JPM BetaBuilders  JPM China

Very weak diversification

The 3 months correlation between JPM and JPM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding JPM BetaBuilders Treasury and JPM China A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM China A 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 JPM China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM China A has no effect on the direction of JPM BetaBuilders i.e., JPM BetaBuilders and JPM China go up and down completely randomly.

Pair Corralation between JPM BetaBuilders and JPM China

Assuming the 90 days trading horizon JPM BetaBuilders is expected to generate 2.22 times less return on investment than JPM China. But when comparing it to its historical volatility, JPM BetaBuilders Treasury is 33.19 times less risky than JPM China. It trades about 0.52 of its potential returns per unit of risk. JPM China A is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,830  in JPM China A on December 21, 2024 and sell it today you would earn a total of  36.00  from holding JPM China A or generate 1.97% return on investment over 90 days.

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

JPM BetaBuilders Treasury  vs.  JPM China A

JPM BetaBuilders Treasury

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in JPM BetaBuilders Treasury are ranked lower than 40 (%) 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.

JPM China A

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPM China A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JPM China is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JPM BetaBuilders and JPM China

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

The idea behind JPM BetaBuilders Treasury and JPM China A 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.