Correlation Between Vanguard and JPMorgan BetaBuilders

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

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

Diversification Opportunities for Vanguard and JPMorgan BetaBuilders

0.99

Correlation Coefficient

Vanguard  JPMorgan BetaBuilders

No risk reduction

The 3 months correlation between Vanguard and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap and JPMorgan BetaBuilders Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders Mid and Vanguard 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 Vanguard SP Mid Cap 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 Mid has no effect on the direction of Vanguard i.e., Vanguard and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Vanguard and JPMorgan BetaBuilders

Given the investment horizon of 90 days Vanguard SP Mid Cap is expected to under-perform the JPMorgan BetaBuilders. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard SP Mid Cap is 1.06 times less risky than JPMorgan BetaBuilders. The etf trades about -0.09 of its potential returns per unit of risk. The JPMorgan BetaBuilders Mid is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  9,598  in JPMorgan BetaBuilders Mid on December 30, 2024 and sell it today you would lose (573.00) from holding JPMorgan BetaBuilders Mid or give up 5.97% of portfolio value over 90 days.

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

Vanguard SP Mid Cap  vs.  JPMorgan BetaBuilders Mid

Vanguard SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

JPMorgan BetaBuilders Mid

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard and JPMorgan BetaBuilders

The main advantage of trading using opposite Vanguard and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard SP Mid Cap and JPMorgan BetaBuilders Mid 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.