Correlation Between SPDR Kensho and JPMorgan Climate

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

By analyzing existing cross correlation between SPDR Kensho Clean and JPMorgan Climate Change, you can compare the effects of market volatilities on SPDR Kensho and JPMorgan Climate 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 SPDR Kensho with a short position of JPMorgan Climate. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Kensho and JPMorgan Climate.

Diversification Opportunities for SPDR Kensho and JPMorgan Climate

0.12

Correlation Coefficient

SPDR Kensho  JPMorgan Climate

Average diversification

The 3 months correlation between SPDR and JPMorgan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Clean and JPMorgan Climate Change in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Climate Change and SPDR Kensho 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 SPDR Kensho Clean are associated (or correlated) with JPMorgan Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Climate Change has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and JPMorgan Climate go up and down completely randomly.

Pair Corralation between SPDR Kensho and JPMorgan Climate

Given the investment horizon of 90 days SPDR Kensho Clean is expected to under-perform the JPMorgan Climate. In addition to that, SPDR Kensho is 2.3 times more volatile than JPMorgan Climate Change. It trades about -0.02 of its total potential returns per unit of risk. JPMorgan Climate Change is currently generating about 0.19 per unit of volatility. If you would invest  4,427  in JPMorgan Climate Change on October 25, 2024 and sell it today you would earn a total of  134.00  from holding JPMorgan Climate Change or generate 3.03% return on investment over 90 days.

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

SPDR Kensho Clean  vs.  JPMorgan Climate Change

SPDR Kensho Clean

Risk-Adjusted Performance

0 of 100

Weak

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

JPMorgan Climate Change

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Climate Change has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, JPMorgan Climate is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR Kensho and JPMorgan Climate

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

The idea behind SPDR Kensho Clean and JPMorgan Climate Change 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.