Correlation Between JPMorgan Quality and WisdomTree International

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

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

Diversification Opportunities for JPMorgan Quality and WisdomTree International

-0.08

Correlation Coefficient

JPMorgan Quality  WisdomTree International

Good diversification

The 3 months correlation between JPMorgan and WisdomTree is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Quality Factor and WisdomTree International Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and JPMorgan Quality 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 Quality Factor are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of JPMorgan Quality i.e., JPMorgan Quality and WisdomTree International go up and down completely randomly.

Pair Corralation between JPMorgan Quality and WisdomTree International

Given the investment horizon of 90 days JPMorgan Quality Factor is expected to under-perform the WisdomTree International. In addition to that, JPMorgan Quality is 1.52 times more volatile than WisdomTree International Hedged. It trades about -0.2 of its total potential returns per unit of risk. WisdomTree International Hedged is currently generating about -0.22 per unit of volatility. If you would invest  4,493  in WisdomTree International Hedged on October 6, 2024 and sell it today you would lose (116.00) from holding WisdomTree International Hedged or give up 2.58% of portfolio value over 90 days.

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

JPMorgan Quality Factor  vs.  WisdomTree International Hedge

JPMorgan Quality Factor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Quality Factor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JPMorgan Quality is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JPMorgan Quality and WisdomTree International

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

The idea behind JPMorgan Quality Factor and WisdomTree International Hedged 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.