Correlation Between SPDR SP and JPMorgan BetaBuilders

Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SP 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 SP 500 and JPMorgan BetaBuilders USD, you can compare the effects of market volatilities on SPDR SP 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 SP with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and JPMorgan BetaBuilders.

Diversification Opportunities for SPDR SP and JPMorgan BetaBuilders

-0.37

Correlation Coefficient

SPDR SP  JPMorgan BetaBuilders

Very good diversification

The 3 months correlation between SPDR and JPMorgan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 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 500 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 SPDR SP i.e., SPDR SP and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between SPDR SP and JPMorgan BetaBuilders

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the JPMorgan BetaBuilders. In addition to that, SPDR SP is 3.14 times more volatile than JPMorgan BetaBuilders USD. It trades about -0.05 of its total potential returns per unit of risk. JPMorgan BetaBuilders USD is currently generating about 0.08 per unit of volatility. If you would invest  4,444  in JPMorgan BetaBuilders USD on December 28, 2024 and sell it today you would earn a total of  67.00  from holding JPMorgan BetaBuilders USD or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

SPDR SP 500  vs.  JPMorgan BetaBuilders USD

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders USD are ranked lower than 6 (%) 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 SPDR SP and JPMorgan BetaBuilders

The main advantage of trading using opposite SPDR SP and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SP 500 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.