Correlation Between Vanguard Small and JPMorgan BetaBuilders

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

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

Diversification Opportunities for Vanguard Small and JPMorgan BetaBuilders

-0.58

Correlation Coefficient

Vanguard Small  JPMorgan BetaBuilders

Excellent diversification

The 3 months correlation between Vanguard and JPMorgan is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index 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 Vanguard Small 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 Vanguard Small Cap Index 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 Vanguard Small i.e., Vanguard Small and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Vanguard Small and JPMorgan BetaBuilders

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to under-perform the JPMorgan BetaBuilders. In addition to that, Vanguard Small is 3.61 times more volatile than JPMorgan BetaBuilders USD. It trades about -0.1 of its total potential returns per unit of risk. JPMorgan BetaBuilders USD is currently generating about 0.1 per unit of volatility. If you would invest  4,444  in JPMorgan BetaBuilders USD on December 29, 2024 and sell it today you would earn a total of  90.00  from holding JPMorgan BetaBuilders USD or generate 2.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Vanguard Small Cap Index  vs.  JPMorgan BetaBuilders USD

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

JPMorgan BetaBuilders USD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders USD are ranked lower than 8 (%) 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 Vanguard Small and JPMorgan BetaBuilders

The main advantage of trading using opposite Vanguard Small and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Vanguard Small Cap Index 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.