Correlation Between IShares ESG and JPMorgan Diversified

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

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

Diversification Opportunities for IShares ESG and JPMorgan Diversified

0.9

Correlation Coefficient

IShares ESG  JPMorgan Diversified

Almost no diversification

The 3 months correlation between IShares and JPMorgan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified and IShares ESG 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 iShares ESG Aware 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 IShares ESG i.e., IShares ESG and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between IShares ESG and JPMorgan Diversified

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 0.77 times more return on investment than JPMorgan Diversified. However, iShares ESG Aware is 1.29 times less risky than JPMorgan Diversified. It trades about 0.16 of its potential returns per unit of risk. JPMorgan Diversified Return is currently generating about 0.11 per unit of risk. If you would invest  7,646  in iShares ESG Aware on February 19, 2024 and sell it today you would earn a total of  538.00  from holding iShares ESG Aware or generate 7.04% return on investment over 90 days.

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

iShares ESG Aware  vs.  JPMorgan Diversified Return

iShares ESG Aware

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in June 2024.

JPMorgan Diversified

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, JPMorgan Diversified is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares ESG and JPMorgan Diversified

The main advantage of trading using opposite IShares ESG and JPMorgan Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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 iShares ESG Aware 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.