Correlation Between JPMorgan BetaBuilders and First Trust

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

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

Diversification Opportunities for JPMorgan BetaBuilders and First Trust

0.93

Correlation Coefficient

JPMorgan BetaBuilders  First Trust

Almost no diversification

The 3 months correlation between JPMorgan and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan BetaBuilders Develope and First Trust Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Asia and JPMorgan BetaBuilders 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 JPMorgan BetaBuilders Developed are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Asia has no effect on the direction of JPMorgan BetaBuilders i.e., JPMorgan BetaBuilders and First Trust go up and down completely randomly.

Pair Corralation between JPMorgan BetaBuilders and First Trust

Given the investment horizon of 90 days JPMorgan BetaBuilders Developed is expected to generate 0.81 times more return on investment than First Trust. However, JPMorgan BetaBuilders Developed is 1.24 times less risky than First Trust. It trades about 0.07 of its potential returns per unit of risk. First Trust Asia is currently generating about 0.05 per unit of risk. If you would invest  5,001  in JPMorgan BetaBuilders Developed on September 3, 2024 and sell it today you would earn a total of  234.00  from holding JPMorgan BetaBuilders Developed or generate 4.68% return on investment over 90 days.

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

JPMorgan BetaBuilders Develope  vs.  First Trust Asia

JPMorgan BetaBuilders

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders Developed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

First Trust Asia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Asia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPMorgan BetaBuilders and First Trust

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

The idea behind JPMorgan BetaBuilders Developed and First Trust Asia 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.