Correlation Between First Trust and JPMorgan BetaBuilders

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

By analyzing existing cross correlation between First Trust TCW and JPMorgan BetaBuilders Canada, you can compare the effects of market volatilities on First Trust and JPMorgan BetaBuilders 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 First Trust with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and JPMorgan BetaBuilders.

Diversification Opportunities for First Trust and JPMorgan BetaBuilders

0.13

Correlation Coefficient

First Trust  JPMorgan BetaBuilders

Average diversification

The 3 months correlation between First and JPMorgan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and JPMorgan BetaBuilders Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and First Trust 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 First Trust TCW are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders has no effect on the direction of First Trust i.e., First Trust and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between First Trust and JPMorgan BetaBuilders

Given the investment horizon of 90 days First Trust is expected to generate 3.29 times less return on investment than JPMorgan BetaBuilders. But when comparing it to its historical volatility, First Trust TCW is 2.04 times less risky than JPMorgan BetaBuilders. It trades about 0.04 of its potential returns per unit of risk. JPMorgan BetaBuilders Canada is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,831  in JPMorgan BetaBuilders Canada on October 4, 2024 and sell it today you would earn a total of  1,247  from holding JPMorgan BetaBuilders Canada or generate 21.39% return on investment over 90 days.

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

First Trust TCW  vs.  JPMorgan BetaBuilders Canada

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan BetaBuilders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan BetaBuilders Canada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and JPMorgan BetaBuilders

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

The idea behind First Trust TCW and JPMorgan BetaBuilders Canada 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.