Correlation Between WisdomTree Japan and JPMorgan BetaBuilders

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

By analyzing existing cross correlation between WisdomTree Japan SmallCap and JPMorgan BetaBuilders Japan, you can compare the effects of market volatilities on WisdomTree Japan 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 WisdomTree Japan with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and JPMorgan BetaBuilders.

Diversification Opportunities for WisdomTree Japan and JPMorgan BetaBuilders

0.92

Correlation Coefficient

WisdomTree Japan  JPMorgan BetaBuilders

Almost no diversification

The 3 months correlation between WisdomTree and JPMorgan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and JPMorgan BetaBuilders Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and WisdomTree Japan 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 WisdomTree Japan SmallCap 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 has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between WisdomTree Japan and JPMorgan BetaBuilders

Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to generate 0.88 times more return on investment than JPMorgan BetaBuilders. However, WisdomTree Japan SmallCap is 1.14 times less risky than JPMorgan BetaBuilders. It trades about -0.2 of its potential returns per unit of risk. JPMorgan BetaBuilders Japan is currently generating about -0.24 per unit of risk. If you would invest  7,679  in WisdomTree Japan SmallCap on January 29, 2024 and sell it today you would lose (244.00) from holding WisdomTree Japan SmallCap or give up 3.18% of portfolio value over 90 days.

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

WisdomTree Japan SmallCap  vs.  JPMorgan BetaBuilders Japan

WisdomTree Japan SmallCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Japan SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, WisdomTree Japan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

JPMorgan BetaBuilders

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders Japan are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with WisdomTree Japan and JPMorgan BetaBuilders

The main advantage of trading using opposite WisdomTree Japan and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan 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 WisdomTree Japan SmallCap and JPMorgan BetaBuilders Japan 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.