Correlation Between IShares MSCI and JPMorgan BetaBuilders

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

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

Diversification Opportunities for IShares MSCI and JPMorgan BetaBuilders

0.99

Correlation Coefficient

IShares MSCI  JPMorgan BetaBuilders

No risk reduction

The 3 months correlation between IShares and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and JPMorgan BetaBuilders Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and IShares 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 iShares MSCI EAFE 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 IShares MSCI i.e., IShares MSCI and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between IShares MSCI and JPMorgan BetaBuilders

Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the JPMorgan BetaBuilders. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI EAFE is 1.06 times less risky than JPMorgan BetaBuilders. The etf trades about -0.16 of its potential returns per unit of risk. The JPMorgan BetaBuilders International is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  6,034  in JPMorgan BetaBuilders International on August 30, 2024 and sell it today you would lose (158.00) from holding JPMorgan BetaBuilders International or give up 2.62% of portfolio value over 90 days.

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

iShares MSCI EAFE  vs.  JPMorgan BetaBuilders Internat

iShares MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

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

JPMorgan BetaBuilders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan BetaBuilders International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and JPMorgan BetaBuilders

The main advantage of trading using opposite IShares MSCI and JPMorgan BetaBuilders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI EAFE and JPMorgan BetaBuilders International 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.