Correlation Between SPDR Portfolio and JPMorgan Inflation

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

By analyzing existing cross correlation between SPDR Portfolio TIPS and JPMorgan Inflation Managed, you can compare the effects of market volatilities on SPDR Portfolio and JPMorgan Inflation 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 Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and JPMorgan Inflation.

Diversification Opportunities for SPDR Portfolio and JPMorgan Inflation

0.99

Correlation Coefficient

SPDR Portfolio  JPMorgan Inflation

No risk reduction

The 3 months correlation between SPDR and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio TIPS and JPMorgan Inflation Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Inflation 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 TIPS are associated (or correlated) with JPMorgan Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Inflation has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and JPMorgan Inflation go up and down completely randomly.

Pair Corralation between SPDR Portfolio and JPMorgan Inflation

Given the investment horizon of 90 days SPDR Portfolio TIPS is expected to generate 1.12 times more return on investment than JPMorgan Inflation. However, SPDR Portfolio is 1.12 times more volatile than JPMorgan Inflation Managed. It trades about 0.21 of its potential returns per unit of risk. JPMorgan Inflation Managed is currently generating about 0.22 per unit of risk. If you would invest  2,533  in SPDR Portfolio TIPS on December 29, 2024 and sell it today you would earn a total of  94.00  from holding SPDR Portfolio TIPS or generate 3.71% return on investment over 90 days.

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

SPDR Portfolio TIPS  vs.  JPMorgan Inflation Managed

SPDR Portfolio TIPS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio TIPS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

JPMorgan Inflation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Inflation Managed are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Inflation is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR Portfolio and JPMorgan Inflation

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

The idea behind SPDR Portfolio TIPS and JPMorgan Inflation Managed 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.