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 Tactical and JPMorgan BetaBuilders USD, 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

0.94

Correlation Coefficient

First Trust  JPMorgan BetaBuilders

Almost no diversification

The 3 months correlation between First and JPMorgan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Tactical and JPMorgan BetaBuilders USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders USD 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 Tactical 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 USD 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 1.46 times less return on investment than JPMorgan BetaBuilders. But when comparing it to its historical volatility, First Trust Tactical is 1.06 times less risky than JPMorgan BetaBuilders. It trades about 0.12 of its potential returns per unit of risk. JPMorgan BetaBuilders USD is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,602  in JPMorgan BetaBuilders USD on August 30, 2024 and sell it today you would earn a total of  95.00  from holding JPMorgan BetaBuilders USD or generate 2.06% return on investment over 90 days.

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

First Trust Tactical  vs.  JPMorgan BetaBuilders USD

First Trust Tactical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Tactical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

JPMorgan BetaBuilders USD

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders USD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical 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 Tactical and JPMorgan BetaBuilders USD 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.