Correlation Between JPM BetaBuilders and JPM Research

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

Diversification Opportunities for JPM BetaBuilders and JPM Research

0.88

Correlation Coefficient

JPM BetaBuilders  JPM Research

Very poor diversification

The 3 months correlation between JPM and JPM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding JPM BetaBuilders Treasury and JPM Research Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM Research Enhanced 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 Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM Research Enhanced has no effect on the direction of JPM BetaBuilders i.e., JPM BetaBuilders and JPM Research go up and down completely randomly.

Pair Corralation between JPM BetaBuilders and JPM Research

Assuming the 90 days trading horizon JPM BetaBuilders is expected to generate 4.5 times less return on investment than JPM Research. But when comparing it to its historical volatility, JPM BetaBuilders Treasury is 20.55 times less risky than JPM Research. It trades about 0.56 of its potential returns per unit of risk. JPM Research Enhanced is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  262,900  in JPM Research Enhanced on October 9, 2024 and sell it today you would earn a total of  7,875  from holding JPM Research Enhanced or generate 3.0% return on investment over 90 days.

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

JPM BetaBuilders Treasury  vs.  JPM Research Enhanced

JPM BetaBuilders Treasury

Risk-Adjusted Performance

47 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in JPM BetaBuilders Treasury are ranked lower than 47 (%) 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 Research Enhanced

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPM Research Enhanced are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JPM Research may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JPM BetaBuilders and JPM Research

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

The idea behind JPM BetaBuilders Treasury and JPM Research Enhanced 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.