Correlation Between ProShares and JPMorgan Value

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

By analyzing existing cross correlation between ProShares SP 500 and JPMorgan Value Factor, you can compare the effects of market volatilities on ProShares and JPMorgan Value 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 ProShares with a short position of JPMorgan Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and JPMorgan Value.

Diversification Opportunities for ProShares and JPMorgan Value

0.79

Correlation Coefficient

ProShares  JPMorgan Value

Poor diversification

The 3 months correlation between ProShares and JPMorgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and JPMorgan Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Value Factor and ProShares 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 ProShares SP 500 are associated (or correlated) with JPMorgan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Value Factor has no effect on the direction of ProShares i.e., ProShares and JPMorgan Value go up and down completely randomly.

Pair Corralation between ProShares and JPMorgan Value

Given the investment horizon of 90 days ProShares is expected to generate 1.84 times less return on investment than JPMorgan Value. But when comparing it to its historical volatility, ProShares SP 500 is 1.34 times less risky than JPMorgan Value. It trades about 0.12 of its potential returns per unit of risk. JPMorgan Value Factor is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,203  in JPMorgan Value Factor on September 2, 2024 and sell it today you would earn a total of  353.00  from holding JPMorgan Value Factor or generate 8.4% return on investment over 90 days.

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

ProShares SP 500  vs.  JPMorgan Value Factor

ProShares SP 500

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ProShares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

JPMorgan Value Factor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Value Factor are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, JPMorgan Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares and JPMorgan Value

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

The idea behind ProShares SP 500 and JPMorgan Value Factor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.