Correlation Between IShares SP and JPMorgan Momentum

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

By analyzing existing cross correlation between iShares SP 500 and JPMorgan Momentum Factor, you can compare the effects of market volatilities on IShares SP and JPMorgan Momentum 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 Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and JPMorgan Momentum.

Diversification Opportunities for IShares SP and JPMorgan Momentum

0.88

Correlation Coefficient

IShares SP  JPMorgan Momentum

Very poor diversification

The 3 months correlation between IShares and JPMorgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and JPMorgan Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Momentum Factor 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 500 are associated (or correlated) with JPMorgan Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Momentum Factor has no effect on the direction of IShares SP i.e., IShares SP and JPMorgan Momentum go up and down completely randomly.

Pair Corralation between IShares SP and JPMorgan Momentum

Considering the 90-day investment horizon iShares SP 500 is expected to under-perform the JPMorgan Momentum. In addition to that, IShares SP is 1.21 times more volatile than JPMorgan Momentum Factor. It trades about -0.08 of its total potential returns per unit of risk. JPMorgan Momentum Factor is currently generating about -0.05 per unit of volatility. If you would invest  5,842  in JPMorgan Momentum Factor on December 29, 2024 and sell it today you would lose (234.00) from holding JPMorgan Momentum Factor or give up 4.01% of portfolio value over 90 days.

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

iShares SP 500  vs.  JPMorgan Momentum Factor

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

JPMorgan Momentum Factor

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares SP and JPMorgan Momentum

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

The idea behind iShares SP 500 and JPMorgan Momentum Factor 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 Commodity Directory module to find actively traded commodities issued by global exchanges.