Correlation Between SPDR SP and JP Morgan

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

By analyzing existing cross correlation between SPDR SP World and JP Morgan Exchange Traded, you can compare the effects of market volatilities on SPDR SP and JP Morgan 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 JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and JP Morgan.

Diversification Opportunities for SPDR SP and JP Morgan

1.0

Correlation Coefficient

SPDR SP  JP Morgan

No risk reduction

The 3 months correlation between SPDR and JIRE is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP World and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange 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 World are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of SPDR SP i.e., SPDR SP and JP Morgan go up and down completely randomly.

Pair Corralation between SPDR SP and JP Morgan

Given the investment horizon of 90 days SPDR SP is expected to generate 1.22 times less return on investment than JP Morgan. In addition to that, SPDR SP is 1.02 times more volatile than JP Morgan Exchange Traded. It trades about 0.15 of its total potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.19 per unit of volatility. If you would invest  5,877  in JP Morgan Exchange Traded on December 27, 2024 and sell it today you would earn a total of  593.00  from holding JP Morgan Exchange Traded or generate 10.09% return on investment over 90 days.

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

SPDR SP World  vs.  JP Morgan Exchange Traded

SPDR SP World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP World are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

JP Morgan Exchange

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JP Morgan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR SP and JP Morgan

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

The idea behind SPDR SP World and JP Morgan Exchange Traded 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.