Correlation Between IShares STOXX and JPMorgan ETFs

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

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

Diversification Opportunities for IShares STOXX and JPMorgan ETFs

0.67

Correlation Coefficient

IShares STOXX  JPMorgan ETFs

Poor diversification

The 3 months correlation between IShares and JPMorgan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares STOXX Europe 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 IShares STOXX 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 iShares STOXX Europe 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 IShares STOXX i.e., IShares STOXX and JPMorgan ETFs go up and down completely randomly.

Pair Corralation between IShares STOXX and JPMorgan ETFs

Assuming the 90 days trading horizon IShares STOXX is expected to generate 1.65 times less return on investment than JPMorgan ETFs. In addition to that, IShares STOXX is 2.29 times more volatile than JPMorgan ETFs ICAV. It trades about 0.07 of its total potential returns per unit of risk. JPMorgan ETFs ICAV is currently generating about 0.25 per unit of volatility. If you would invest  9,089  in JPMorgan ETFs ICAV on September 30, 2024 and sell it today you would earn a total of  588.00  from holding JPMorgan ETFs ICAV or generate 6.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

iShares STOXX Europe  vs.  JPMorgan ETFs ICAV

iShares STOXX Europe

Risk-Adjusted Performance

5 of 100

Modest

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

JPMorgan ETFs ICAV

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan ETFs ICAV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JPMorgan ETFs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares STOXX and JPMorgan ETFs

The main advantage of trading using opposite IShares STOXX and JPMorgan ETFs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares STOXX 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 iShares STOXX Europe 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.