Correlation Between JPMorgan Equity and Proshares Russell

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

By analyzing existing cross correlation between JPMorgan Equity Premium and Proshares Russell 2000, you can compare the effects of market volatilities on JPMorgan Equity and Proshares Russell 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 Equity with a short position of Proshares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Equity and Proshares Russell.

Diversification Opportunities for JPMorgan Equity and Proshares Russell

0.69

Correlation Coefficient

JPMorgan Equity  Proshares Russell

Poor diversification

The 3 months correlation between JPMorgan and Proshares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and Proshares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proshares Russell 2000 and JPMorgan Equity 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 Equity Premium are associated (or correlated) with Proshares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proshares Russell 2000 has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and Proshares Russell go up and down completely randomly.

Pair Corralation between JPMorgan Equity and Proshares Russell

Given the investment horizon of 90 days JPMorgan Equity is expected to generate 4.62 times less return on investment than Proshares Russell. But when comparing it to its historical volatility, JPMorgan Equity Premium is 13.26 times less risky than Proshares Russell. It trades about 0.16 of its potential returns per unit of risk. Proshares Russell 2000 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,887  in Proshares Russell 2000 on September 12, 2024 and sell it today you would earn a total of  401.10  from holding Proshares Russell 2000 or generate 10.32% return on investment over 90 days.

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

JPMorgan Equity Premium  vs.  Proshares Russell 2000

JPMorgan Equity Premium

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Proshares Russell 2000

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Proshares Russell displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Equity and Proshares Russell

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

The idea behind JPMorgan Equity Premium and Proshares Russell 2000 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.