Correlation Between SPDR Portfolio and JP Morgan

Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and JP Morgan 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 SPDR Portfolio and JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR Portfolio Mortgage and JP Morgan Exchange Traded, you can compare the effects of market volatilities on SPDR Portfolio and JP Morgan 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 SPDR Portfolio with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and JP Morgan.

Diversification Opportunities for SPDR Portfolio and JP Morgan

0.99

Correlation Coefficient

SPDR Portfolio  JP Morgan

No risk reduction

The 3 months correlation between SPDR and BBIB is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Mortgage and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and SPDR Portfolio 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 SPDR Portfolio Mortgage are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and JP Morgan go up and down completely randomly.

Pair Corralation between SPDR Portfolio and JP Morgan

Given the investment horizon of 90 days SPDR Portfolio Mortgage is expected to generate 1.26 times more return on investment than JP Morgan. However, SPDR Portfolio is 1.26 times more volatile than JP Morgan Exchange Traded. It trades about -0.04 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about -0.05 per unit of risk. If you would invest  2,227  in SPDR Portfolio Mortgage on September 3, 2024 and sell it today you would lose (19.00) from holding SPDR Portfolio Mortgage or give up 0.85% of portfolio value over 90 days.

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

SPDR Portfolio Mortgage  vs.  JP Morgan Exchange Traded

SPDR Portfolio Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, SPDR Portfolio is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

JP Morgan Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JP Morgan Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, JP Morgan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Portfolio and JP Morgan

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

The idea behind SPDR Portfolio Mortgage and JP Morgan Exchange Traded 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.