Correlation Between Amazon and Jpmorgan
Can any of the company-specific risk be diversified away by investing in both Amazon and Jpmorgan 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 Amazon and Jpmorgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Jpmorgan Equity Fund, you can compare the effects of market volatilities on Amazon and Jpmorgan 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 Amazon with a short position of Jpmorgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Jpmorgan.
Diversification Opportunities for Amazon and Jpmorgan
Very poor diversification
The 3 months correlation between Amazon and Jpmorgan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Jpmorgan Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Equity and Amazon 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 Amazon Inc are associated (or correlated) with Jpmorgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Equity has no effect on the direction of Amazon i.e., Amazon and Jpmorgan go up and down completely randomly.
Pair Corralation between Amazon and Jpmorgan
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.27 times more return on investment than Jpmorgan. However, Amazon is 2.27 times more volatile than Jpmorgan Equity Fund. It trades about 0.2 of its potential returns per unit of risk. Jpmorgan Equity Fund is currently generating about 0.31 per unit of risk. If you would invest 19,578 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 1,493 from holding Amazon Inc or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Amazon Inc vs. Jpmorgan Equity Fund
Performance |
| Timeline |
| Amazon Inc |
| Jpmorgan Equity |
Amazon and Jpmorgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Jpmorgan
The main advantage of trading using opposite Amazon and Jpmorgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Jpmorgan 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 will offset losses from the drop in Jpmorgan's long position.The idea behind Amazon Inc and Jpmorgan Equity Fund 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.| Jpmorgan vs. Jpmorgan Equity Fund | Jpmorgan vs. Jpmorgan Equity Fund | Jpmorgan vs. Jpmorgan Equity Fund | Jpmorgan vs. Jpmorgan Equity Fund |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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