Correlation Between IShares Aaa and JPMorgan BetaBuilders

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

By analyzing existing cross correlation between iShares Aaa and JPMorgan BetaBuilders USD, you can compare the effects of market volatilities on IShares Aaa and JPMorgan BetaBuilders 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 IShares Aaa with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Aaa and JPMorgan BetaBuilders.

Diversification Opportunities for IShares Aaa and JPMorgan BetaBuilders

0.84

Correlation Coefficient

IShares Aaa  JPMorgan BetaBuilders

Very poor diversification

The 3 months correlation between IShares and JPMorgan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aaa and JPMorgan BetaBuilders USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders USD and IShares Aaa 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 iShares Aaa are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders USD has no effect on the direction of IShares Aaa i.e., IShares Aaa and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between IShares Aaa and JPMorgan BetaBuilders

Given the investment horizon of 90 days IShares Aaa is expected to generate 1.03 times less return on investment than JPMorgan BetaBuilders. But when comparing it to its historical volatility, iShares Aaa is 1.0 times less risky than JPMorgan BetaBuilders. It trades about 0.1 of its potential returns per unit of risk. JPMorgan BetaBuilders USD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,444  in JPMorgan BetaBuilders USD on December 29, 2024 and sell it today you would earn a total of  90.00  from holding JPMorgan BetaBuilders USD or generate 2.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

iShares Aaa   vs.  JPMorgan BetaBuilders USD

iShares Aaa

Risk-Adjusted Performance

OK

Over the last 90 days iShares Aaa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Aaa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JPMorgan BetaBuilders USD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders USD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Aaa and JPMorgan BetaBuilders

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

The idea behind iShares Aaa and JPMorgan BetaBuilders USD 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.