Correlation Between Schwab REIT and JPMorgan BetaBuilders

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

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

Diversification Opportunities for Schwab REIT and JPMorgan BetaBuilders

0.95

Correlation Coefficient

Schwab REIT  JPMorgan BetaBuilders

Almost no diversification

The 3 months correlation between Schwab and JPMorgan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Schwab REIT ETF and JPMorgan BetaBuilders MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and Schwab REIT 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 Schwab REIT ETF 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 has no effect on the direction of Schwab REIT i.e., Schwab REIT and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Schwab REIT and JPMorgan BetaBuilders

Given the investment horizon of 90 days Schwab REIT ETF is expected to under-perform the JPMorgan BetaBuilders. But the etf apears to be less risky and, when comparing its historical volatility, Schwab REIT ETF is 1.01 times less risky than JPMorgan BetaBuilders. The etf trades about -0.39 of its potential returns per unit of risk. The JPMorgan BetaBuilders MSCI is currently generating about -0.35 of returns per unit of risk over similar time horizon. If you would invest  10,162  in JPMorgan BetaBuilders MSCI on September 24, 2024 and sell it today you would lose (774.00) from holding JPMorgan BetaBuilders MSCI or give up 7.62% of portfolio value over 90 days.

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

Schwab REIT ETF  vs.  JPMorgan BetaBuilders MSCI

Schwab REIT ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab REIT ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

JPMorgan BetaBuilders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan BetaBuilders MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Schwab REIT and JPMorgan BetaBuilders

The main advantage of trading using opposite Schwab REIT and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab REIT 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 Schwab REIT ETF and JPMorgan BetaBuilders MSCI 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.