Correlation Between JPMorgan Active and SPDR SP

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

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

Diversification Opportunities for JPMorgan Active and SPDR SP

0.87

Correlation Coefficient

JPMorgan Active  SPDR SP

Very poor diversification

The 3 months correlation between JPMorgan and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Active Value and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and JPMorgan Active 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 JPMorgan Active Value are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of JPMorgan Active i.e., JPMorgan Active and SPDR SP go up and down completely randomly.

Pair Corralation between JPMorgan Active and SPDR SP

Given the investment horizon of 90 days JPMorgan Active Value is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, JPMorgan Active Value is 1.24 times less risky than SPDR SP. The etf trades about -0.06 of its potential returns per unit of risk. The SPDR SP Global is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,328  in SPDR SP Global on December 2, 2024 and sell it today you would lose (97.00) from holding SPDR SP Global or give up 1.82% of portfolio value over 90 days.

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

JPMorgan Active Value  vs.  SPDR SP Global

JPMorgan Active Value

Risk-Adjusted Performance

Very Weak

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

SPDR SP Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with JPMorgan Active and SPDR SP

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

The idea behind JPMorgan Active Value and SPDR SP Global 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 Channel module to use Commodity Channel Index to analyze current equity momentum.