Correlation Between SPDR Portfolio and JPMorgan BetaBuilders

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

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

Diversification Opportunities for SPDR Portfolio and JPMorgan BetaBuilders

1.0

Correlation Coefficient

SPDR Portfolio  JPMorgan BetaBuilders

No risk reduction

The 3 months correlation between SPDR and JPMorgan is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Aggregate and JPMorgan BetaBuilders Aggregat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and SPDR Portfolio 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 Portfolio Aggregate 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 SPDR Portfolio i.e., SPDR Portfolio and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between SPDR Portfolio and JPMorgan BetaBuilders

Given the investment horizon of 90 days SPDR Portfolio Aggregate is expected to generate 1.01 times more return on investment than JPMorgan BetaBuilders. However, SPDR Portfolio is 1.01 times more volatile than JPMorgan BetaBuilders Aggregate. It trades about -0.02 of its potential returns per unit of risk. JPMorgan BetaBuilders Aggregate is currently generating about -0.03 per unit of risk. If you would invest  2,574  in SPDR Portfolio Aggregate on September 1, 2024 and sell it today you would lose (13.00) from holding SPDR Portfolio Aggregate or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

SPDR Portfolio Aggregate  vs.  JPMorgan BetaBuilders Aggregat

SPDR Portfolio Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

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

JPMorgan BetaBuilders

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR Portfolio and JPMorgan BetaBuilders

The main advantage of trading using opposite SPDR Portfolio and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 SPDR Portfolio Aggregate and JPMorgan BetaBuilders Aggregate 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.