Correlation Between JPMorgan BetaBuilders and WisdomTree Multifactor

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

Diversification Opportunities for JPMorgan BetaBuilders and WisdomTree Multifactor

0.83

Correlation Coefficient

JPMorgan BetaBuilders  WisdomTree Multifactor

Very poor diversification

The 3 months correlation between JPMorgan and WisdomTree is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan BetaBuilders Mid and WisdomTree Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Multifactor 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 WisdomTree Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Multifactor has no effect on the direction of JPMorgan BetaBuilders i.e., JPMorgan BetaBuilders and WisdomTree Multifactor go up and down completely randomly.

Pair Corralation between JPMorgan BetaBuilders and WisdomTree Multifactor

Given the investment horizon of 90 days JPMorgan BetaBuilders is expected to generate 1.92 times less return on investment than WisdomTree Multifactor. In addition to that, JPMorgan BetaBuilders is 1.53 times more volatile than WisdomTree Multifactor. It trades about 0.02 of its total potential returns per unit of risk. WisdomTree Multifactor is currently generating about 0.07 per unit of volatility. If you would invest  4,483  in WisdomTree Multifactor on December 5, 2024 and sell it today you would earn a total of  528.00  from holding WisdomTree Multifactor or generate 11.78% return on investment over 90 days.

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

JPMorgan BetaBuilders Mid  vs.  WisdomTree Multifactor

JPMorgan BetaBuilders Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan BetaBuilders Mid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

WisdomTree Multifactor

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, WisdomTree Multifactor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JPMorgan BetaBuilders and WisdomTree Multifactor

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

The idea behind JPMorgan BetaBuilders Mid and WisdomTree Multifactor 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.