Correlation Between Xtrackers MSCI and JPMorgan ETFs

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

By analyzing existing cross correlation between Xtrackers MSCI and JPMorgan ETFs ICAV, you can compare the effects of market volatilities on Xtrackers MSCI and JPMorgan ETFs 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 Xtrackers MSCI with a short position of JPMorgan ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and JPMorgan ETFs.

Diversification Opportunities for Xtrackers MSCI and JPMorgan ETFs

0.72

Correlation Coefficient

Xtrackers MSCI  JPMorgan ETFs

Poor diversification

The 3 months correlation between Xtrackers and JPMorgan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI and JPMorgan ETFs ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan ETFs ICAV and Xtrackers MSCI 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 Xtrackers MSCI are associated (or correlated) with JPMorgan ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan ETFs ICAV has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and JPMorgan ETFs go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and JPMorgan ETFs

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 4.57 times more return on investment than JPMorgan ETFs. However, Xtrackers MSCI is 4.57 times more volatile than JPMorgan ETFs ICAV. It trades about 0.05 of its potential returns per unit of risk. JPMorgan ETFs ICAV is currently generating about 0.07 per unit of risk. If you would invest  3,192  in Xtrackers MSCI on September 29, 2024 and sell it today you would earn a total of  66.00  from holding Xtrackers MSCI or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.71%
Values	Daily Returns

Xtrackers MSCI  vs.  JPMorgan ETFs ICAV

Xtrackers MSCI

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

JPMorgan ETFs ICAV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan ETFs ICAV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, JPMorgan ETFs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers MSCI and JPMorgan ETFs

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

The idea behind Xtrackers MSCI and JPMorgan ETFs ICAV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.