Correlation Between JPMorgan BetaBuilders and SPDR SP

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

By analyzing existing cross correlation between JPMorgan BetaBuilders Mid and SPDR SP MIDCAP, you can compare the effects of market volatilities on JPMorgan BetaBuilders and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan BetaBuilders and SPDR SP.

Diversification Opportunities for JPMorgan BetaBuilders and SPDR SP

0.85

Correlation Coefficient

JPMorgan BetaBuilders  SPDR SP

Very poor diversification

The 3 months correlation between JPMorgan and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan BetaBuilders Mid and SPDR SP MIDCAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP MIDCAP 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 Mid are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP MIDCAP has no effect on the direction of JPMorgan BetaBuilders i.e., JPMorgan BetaBuilders and SPDR SP go up and down completely randomly.

Pair Corralation between JPMorgan BetaBuilders and SPDR SP

Given the investment horizon of 90 days JPMorgan BetaBuilders Mid is expected to generate 1.02 times more return on investment than SPDR SP. However, JPMorgan BetaBuilders is 1.02 times more volatile than SPDR SP MIDCAP. It trades about 0.19 of its potential returns per unit of risk. SPDR SP MIDCAP is currently generating about 0.14 per unit of risk. If you would invest  9,261  in JPMorgan BetaBuilders Mid on August 30, 2024 and sell it today you would earn a total of  1,161  from holding JPMorgan BetaBuilders Mid or generate 12.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

JPMorgan BetaBuilders Mid  vs.  SPDR SP MIDCAP

JPMorgan BetaBuilders Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders Mid are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, JPMorgan BetaBuilders may actually be approaching a critical reversion point that can send shares even higher in December 2024.

SPDR SP MIDCAP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP MIDCAP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with JPMorgan BetaBuilders and SPDR SP

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

The idea behind JPMorgan BetaBuilders Mid and SPDR SP MIDCAP 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.