Correlation Between IShares SP and JPMorgan Diversified

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

By analyzing existing cross correlation between iShares SP Mid Cap and JPMorgan Diversified Return, you can compare the effects of market volatilities on IShares SP and JPMorgan Diversified 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 IShares SP with a short position of JPMorgan Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and JPMorgan Diversified.

Diversification Opportunities for IShares SP and JPMorgan Diversified

0.93

Correlation Coefficient

IShares SP  JPMorgan Diversified

Almost no diversification

The 3 months correlation between IShares and JPMorgan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified and IShares SP 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 iShares SP Mid Cap are associated (or correlated) with JPMorgan Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Diversified has no effect on the direction of IShares SP i.e., IShares SP and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between IShares SP and JPMorgan Diversified

Considering the 90-day investment horizon iShares SP Mid Cap is expected to generate 1.63 times more return on investment than JPMorgan Diversified. However, IShares SP is 1.63 times more volatile than JPMorgan Diversified Return. It trades about 0.19 of its potential returns per unit of risk. JPMorgan Diversified Return is currently generating about 0.15 per unit of risk. If you would invest  11,915  in iShares SP Mid Cap on September 4, 2024 and sell it today you would earn a total of  1,481  from holding iShares SP Mid Cap or generate 12.43% return on investment over 90 days.

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

iShares SP Mid Cap  vs.  JPMorgan Diversified Return

iShares SP Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward-looking indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JPMorgan Diversified

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JPMorgan Diversified is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares SP and JPMorgan Diversified

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

The idea behind iShares SP Mid Cap and JPMorgan Diversified Return 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.