Correlation Between IShares Russell and JPMorgan Momentum

Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 Russell 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 Russell 1000 and JPMorgan Momentum Factor, you can compare the effects of market volatilities on IShares Russell 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 Russell with a short position of JPMorgan Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and JPMorgan Momentum.

Diversification Opportunities for IShares Russell and JPMorgan Momentum

0.98

Correlation Coefficient

IShares Russell  JPMorgan Momentum

Almost no diversification

The 3 months correlation between IShares and JPMorgan is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 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 Russell 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 Russell 1000 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 Russell i.e., IShares Russell and JPMorgan Momentum go up and down completely randomly.

Pair Corralation between IShares Russell and JPMorgan Momentum

Considering the 90-day investment horizon IShares Russell is expected to generate 1.31 times less return on investment than JPMorgan Momentum. In addition to that, IShares Russell is 1.04 times more volatile than JPMorgan Momentum Factor. It trades about 0.28 of its total potential returns per unit of risk. JPMorgan Momentum Factor is currently generating about 0.38 per unit of volatility. If you would invest  5,706  in JPMorgan Momentum Factor on September 2, 2024 and sell it today you would earn a total of  435.00  from holding JPMorgan Momentum Factor or generate 7.62% return on investment over 90 days.

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

iShares Russell 1000  vs.  JPMorgan Momentum Factor

iShares Russell 1000

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JPMorgan Momentum Factor

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Momentum Factor are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, JPMorgan Momentum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Russell and JPMorgan Momentum

The main advantage of trading using opposite IShares Russell and JPMorgan Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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 Russell 1000 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.