Correlation Between IShares Core and JPMorgan Core

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

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

Diversification Opportunities for IShares Core and JPMorgan Core

1.0

Correlation Coefficient

IShares Core  JPMorgan Core

No risk reduction

The 3 months correlation between IShares and JPMorgan is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Total and JPMorgan Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Core Plus and IShares Core 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 Core Total are associated (or correlated) with JPMorgan Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Core Plus has no effect on the direction of IShares Core i.e., IShares Core and JPMorgan Core go up and down completely randomly.

Pair Corralation between IShares Core and JPMorgan Core

Given the investment horizon of 90 days iShares Core Total is expected to generate 0.99 times more return on investment than JPMorgan Core. However, iShares Core Total is 1.01 times less risky than JPMorgan Core. It trades about -0.12 of its potential returns per unit of risk. JPMorgan Core Plus is currently generating about -0.12 per unit of risk. If you would invest  4,680  in iShares Core Total on August 30, 2024 and sell it today you would lose (75.00) from holding iShares Core Total or give up 1.6% of portfolio value over 90 days.

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

iShares Core Total  vs.  JPMorgan Core Plus

iShares Core Total

Risk-Adjusted Performance

0 of 100

Very Weak

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

JPMorgan Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Core and JPMorgan Core

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

The idea behind iShares Core Total and JPMorgan Core Plus 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.