Correlation Between JPMorgan Inflation and Dimensional ETF

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Can any of the company-specific risk be diversified away by investing in both JPMorgan Inflation and Dimensional ETF 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 Inflation and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPMorgan Inflation Managed and Dimensional ETF Trust, you can compare the effects of market volatilities on JPMorgan Inflation and Dimensional ETF 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 Inflation with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Inflation and Dimensional ETF.

Diversification Opportunities for JPMorgan Inflation and Dimensional ETF

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between JPMorgan and Dimensional is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Inflation Managed and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and JPMorgan Inflation 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 Inflation Managed are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of JPMorgan Inflation i.e., JPMorgan Inflation and Dimensional ETF go up and down completely randomly.

Pair Corralation between JPMorgan Inflation and Dimensional ETF

Given the investment horizon of 90 days JPMorgan Inflation Managed is expected to generate 0.84 times more return on investment than Dimensional ETF. However, JPMorgan Inflation Managed is 1.19 times less risky than Dimensional ETF. It trades about 0.13 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.08 per unit of risk. If you would invest  4,691  in JPMorgan Inflation Managed on November 28, 2024 and sell it today you would earn a total of  84.00  from holding JPMorgan Inflation Managed or generate 1.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

JPMorgan Inflation Managed  vs.  Dimensional ETF Trust

 Performance 
       Timeline  
JPMorgan Inflation 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Inflation Managed are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Inflation is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Dimensional ETF Trust 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

JPMorgan Inflation and Dimensional ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Inflation and Dimensional ETF

The main advantage of trading using opposite JPMorgan Inflation and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Inflation position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.
The idea behind JPMorgan Inflation Managed and Dimensional ETF Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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