Correlation Between SPDR SP and JPMorgan Fundamental

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

By analyzing existing cross correlation between SPDR SP 400 and JPMorgan Fundamental Data, you can compare the effects of market volatilities on SPDR SP and JPMorgan Fundamental 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 SPDR SP with a short position of JPMorgan Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and JPMorgan Fundamental.

Diversification Opportunities for SPDR SP and JPMorgan Fundamental

0.85

Correlation Coefficient

SPDR SP  JPMorgan Fundamental

Very poor diversification

The 3 months correlation between SPDR and JPMorgan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and JPMorgan Fundamental Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Fundamental Data and SPDR SP 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 SPDR SP 400 are associated (or correlated) with JPMorgan Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Fundamental Data has no effect on the direction of SPDR SP i.e., SPDR SP and JPMorgan Fundamental go up and down completely randomly.

Pair Corralation between SPDR SP and JPMorgan Fundamental

Given the investment horizon of 90 days SPDR SP 400 is not expected to generate positive returns. Moreover, SPDR SP is 1.34 times more volatile than JPMorgan Fundamental Data. It trades away all of its potential returns to assume current level of volatility. JPMorgan Fundamental Data is currently generating about -0.03 per unit of risk. If you would invest  8,944  in SPDR SP 400 on November 19, 2024 and sell it today you would lose (25.00) from holding SPDR SP 400 or give up 0.28% of portfolio value over 90 days.

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

SPDR SP 400  vs.  JPMorgan Fundamental Data

SPDR SP 400

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 400 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

JPMorgan Fundamental Data

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR SP and JPMorgan Fundamental

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

The idea behind SPDR SP 400 and JPMorgan Fundamental Data 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.