Correlation Between IShares Core and JPMorgan Value

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

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

Diversification Opportunities for IShares Core and JPMorgan Value

0.87

Correlation Coefficient

IShares Core  JPMorgan Value

Very poor diversification

The 3 months correlation between IShares and JPMorgan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and JPMorgan Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Value Factor and IShares Core 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 Core SP are associated (or correlated) with JPMorgan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Value Factor has no effect on the direction of IShares Core i.e., IShares Core and JPMorgan Value go up and down completely randomly.

Pair Corralation between IShares Core and JPMorgan Value

Given the investment horizon of 90 days iShares Core SP is expected to under-perform the JPMorgan Value. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SP is 1.2 times less risky than JPMorgan Value. The etf trades about -0.01 of its potential returns per unit of risk. The JPMorgan Value Factor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,351  in JPMorgan Value Factor on September 27, 2024 and sell it today you would earn a total of  29.00  from holding JPMorgan Value Factor or generate 0.67% return on investment over 90 days.

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

iShares Core SP  vs.  JPMorgan Value Factor

iShares Core SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JPMorgan Value Factor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Value Factor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, JPMorgan Value is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and JPMorgan Value

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

The idea behind iShares Core SP and JPMorgan Value Factor 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.