Correlation Between Xtrackers MSCI and JPMorgan Diversified

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

By analyzing existing cross correlation between Xtrackers MSCI All and JPMorgan Diversified Return, you can compare the effects of market volatilities on Xtrackers MSCI and JPMorgan Diversified 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 MSCI with a short position of JPMorgan Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and JPMorgan Diversified.

Diversification Opportunities for Xtrackers MSCI and JPMorgan Diversified

0.9

Correlation Coefficient

Xtrackers MSCI  JPMorgan Diversified

Almost no diversification

The 3 months correlation between Xtrackers and JPMorgan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI All and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified and Xtrackers MSCI 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 MSCI All are associated (or correlated) with JPMorgan Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Diversified has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and JPMorgan Diversified

Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 1.1 times less return on investment than JPMorgan Diversified. But when comparing it to its historical volatility, Xtrackers MSCI All is 1.42 times less risky than JPMorgan Diversified. It trades about 0.39 of its potential returns per unit of risk. JPMorgan Diversified Return is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  5,462  in JPMorgan Diversified Return on February 15, 2024 and sell it today you would earn a total of  277.50  from holding JPMorgan Diversified Return or generate 5.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Xtrackers MSCI All  vs.  JPMorgan Diversified Return

Xtrackers MSCI All

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI All are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in June 2024.

JPMorgan Diversified

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, JPMorgan Diversified may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Xtrackers MSCI and JPMorgan Diversified

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

The idea behind Xtrackers MSCI All and JPMorgan Diversified Return 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.