Correlation Between JPM BetaBuilders and WisdomTree Natural

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

By analyzing existing cross correlation between JPM BetaBuilders China and WisdomTree Natural Gas, you can compare the effects of market volatilities on JPM BetaBuilders and WisdomTree Natural 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 JPM BetaBuilders with a short position of WisdomTree Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM BetaBuilders and WisdomTree Natural.

Diversification Opportunities for JPM BetaBuilders and WisdomTree Natural

0.14

Correlation Coefficient

JPM BetaBuilders  WisdomTree Natural

Average diversification

The 3 months correlation between JPM and WisdomTree is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding JPM BetaBuilders China and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas and JPM BetaBuilders 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 JPM BetaBuilders China are associated (or correlated) with WisdomTree Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of JPM BetaBuilders i.e., JPM BetaBuilders and WisdomTree Natural go up and down completely randomly.

Pair Corralation between JPM BetaBuilders and WisdomTree Natural

Assuming the 90 days trading horizon JPM BetaBuilders China is expected to under-perform the WisdomTree Natural. But the etf apears to be less risky and, when comparing its historical volatility, JPM BetaBuilders China is 46.77 times less risky than WisdomTree Natural. The etf trades about -0.02 of its potential returns per unit of risk. The WisdomTree Natural Gas is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  132,757  in WisdomTree Natural Gas on October 9, 2024 and sell it today you would lose (7,717) from holding WisdomTree Natural Gas or give up 5.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

JPM BetaBuilders China  vs.  WisdomTree Natural Gas

JPM BetaBuilders China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM BetaBuilders China has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, JPM BetaBuilders is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Natural Gas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Natural Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Natural unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPM BetaBuilders and WisdomTree Natural

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

The idea behind JPM BetaBuilders China and WisdomTree Natural Gas 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.