Correlation Between Vanguard Extended and JPMorgan BetaBuilders

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

Diversification Opportunities for Vanguard Extended and JPMorgan BetaBuilders

0.99

Correlation Coefficient

Vanguard Extended  JPMorgan BetaBuilders

No risk reduction

The 3 months correlation between Vanguard and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and JPMorgan BetaBuilders Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders Mid and Vanguard Extended 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 Extended Market 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 Mid has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Vanguard Extended and JPMorgan BetaBuilders

Considering the 90-day investment horizon Vanguard Extended Market is expected to under-perform the JPMorgan BetaBuilders. In addition to that, Vanguard Extended is 1.14 times more volatile than JPMorgan BetaBuilders Mid. It trades about -0.11 of its total potential returns per unit of risk. JPMorgan BetaBuilders Mid is currently generating about -0.08 per unit of volatility. If you would invest  9,598  in JPMorgan BetaBuilders Mid on December 30, 2024 and sell it today you would lose (573.00) from holding JPMorgan BetaBuilders Mid or give up 5.97% of portfolio value over 90 days.

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

Vanguard Extended Market  vs.  JPMorgan BetaBuilders Mid

Vanguard Extended Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Extended Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

JPMorgan BetaBuilders Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan BetaBuilders Mid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Extended and JPMorgan BetaBuilders

The main advantage of trading using opposite Vanguard Extended and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended 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 Extended Market and JPMorgan BetaBuilders Mid 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 Global Correlations module to find global opportunities by holding instruments from different markets.