Correlation Between JPMorgan International and SPDR FTSE

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

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

Diversification Opportunities for JPMorgan International and SPDR FTSE

0.9

Correlation Coefficient

JPMorgan International  SPDR FTSE

Almost no diversification

The 3 months correlation between JPMorgan and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan International Bond and SPDR FTSE International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FTSE International and JPMorgan International 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 International Bond are associated (or correlated) with SPDR FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FTSE International has no effect on the direction of JPMorgan International i.e., JPMorgan International and SPDR FTSE go up and down completely randomly.

Pair Corralation between JPMorgan International and SPDR FTSE

Given the investment horizon of 90 days JPMorgan International is expected to generate 2.4 times less return on investment than SPDR FTSE. But when comparing it to its historical volatility, JPMorgan International Bond is 3.15 times less risky than SPDR FTSE. It trades about 0.14 of its potential returns per unit of risk. SPDR FTSE International is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,599  in SPDR FTSE International on December 28, 2024 and sell it today you would earn a total of  144.00  from holding SPDR FTSE International or generate 4.0% return on investment over 90 days.

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

JPMorgan International Bond  vs.  SPDR FTSE International

JPMorgan International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan International Bond are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, JPMorgan International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR FTSE International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FTSE International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR FTSE is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with JPMorgan International and SPDR FTSE

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

The idea behind JPMorgan International Bond and SPDR FTSE International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.