Correlation Between Xtrackers Low and JPMorgan BetaBuilders

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Can any of the company-specific risk be diversified away by investing in both Xtrackers Low and JPMorgan BetaBuilders 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 Low and JPMorgan BetaBuilders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers Low Beta and JPMorgan BetaBuilders USD, you can compare the effects of market volatilities on Xtrackers Low and JPMorgan BetaBuilders 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 Low with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Low and JPMorgan BetaBuilders.

Diversification Opportunities for Xtrackers Low and JPMorgan BetaBuilders

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Xtrackers and JPMorgan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Low Beta and JPMorgan BetaBuilders USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders USD and Xtrackers Low 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 Low Beta are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders USD has no effect on the direction of Xtrackers Low i.e., Xtrackers Low and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Xtrackers Low and JPMorgan BetaBuilders

Given the investment horizon of 90 days Xtrackers Low is expected to generate 1.4 times less return on investment than JPMorgan BetaBuilders. But when comparing it to its historical volatility, Xtrackers Low Beta is 1.1 times less risky than JPMorgan BetaBuilders. It trades about 0.12 of its potential returns per unit of risk. JPMorgan BetaBuilders USD is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,220  in JPMorgan BetaBuilders USD on August 27, 2024 and sell it today you would earn a total of  454.00  from holding JPMorgan BetaBuilders USD or generate 10.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Xtrackers Low Beta  vs.  JPMorgan BetaBuilders USD

 Performance 
       Timeline  
Xtrackers Low Beta 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Low Beta are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Xtrackers Low is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JPMorgan BetaBuilders USD 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders USD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Xtrackers Low and JPMorgan BetaBuilders Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtrackers Low and JPMorgan BetaBuilders

The main advantage of trading using opposite Xtrackers Low and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Low position performs unexpectedly, JPMorgan BetaBuilders 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 BetaBuilders will offset losses from the drop in JPMorgan BetaBuilders' long position.
The idea behind Xtrackers Low Beta and JPMorgan BetaBuilders USD 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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