Correlation Between JPMorgan BetaBuilders and Vanguard Extended

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

Diversification Opportunities for JPMorgan BetaBuilders and Vanguard Extended

0.98

Correlation Coefficient

JPMorgan BetaBuilders  Vanguard Extended

Almost no diversification

The 3 months correlation between JPMorgan and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan BetaBuilders Mid and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market 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 Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of JPMorgan BetaBuilders i.e., JPMorgan BetaBuilders and Vanguard Extended go up and down completely randomly.

Pair Corralation between JPMorgan BetaBuilders and Vanguard Extended

Given the investment horizon of 90 days JPMorgan BetaBuilders Mid is expected to generate 0.87 times more return on investment than Vanguard Extended. However, JPMorgan BetaBuilders Mid is 1.14 times less risky than Vanguard Extended. It trades about -0.13 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about -0.13 per unit of risk. If you would invest  10,391  in JPMorgan BetaBuilders Mid on November 28, 2024 and sell it today you would lose (742.00) from holding JPMorgan BetaBuilders Mid or give up 7.14% of portfolio value over 90 days.

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

JPMorgan BetaBuilders Mid  vs.  Vanguard Extended Market

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.

Vanguard Extended Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Extended Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with JPMorgan BetaBuilders and Vanguard Extended

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

The idea behind JPMorgan BetaBuilders Mid and Vanguard Extended Market 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.