Correlation Between Multimedia Portfolio and Jpmorgan Equity
Can any of the company-specific risk be diversified away by investing in both Multimedia Portfolio and Jpmorgan Equity 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 Multimedia Portfolio and Jpmorgan Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multimedia Portfolio Multimedia and Jpmorgan Equity Income, you can compare the effects of market volatilities on Multimedia Portfolio and Jpmorgan Equity 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 Multimedia Portfolio with a short position of Jpmorgan Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimedia Portfolio and Jpmorgan Equity.
Diversification Opportunities for Multimedia Portfolio and Jpmorgan Equity
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Multimedia and JPMORGAN is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Multimedia Portfolio Multimedi and Jpmorgan Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Equity Income and Multimedia Portfolio 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 Multimedia Portfolio Multimedia are associated (or correlated) with Jpmorgan Equity. 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 Income has no effect on the direction of Multimedia Portfolio i.e., Multimedia Portfolio and Jpmorgan Equity go up and down completely randomly.
Pair Corralation between Multimedia Portfolio and Jpmorgan Equity
Assuming the 90 days horizon Multimedia Portfolio Multimedia is expected to generate 1.7 times more return on investment than Jpmorgan Equity. However, Multimedia Portfolio is 1.7 times more volatile than Jpmorgan Equity Income. It trades about 0.12 of its potential returns per unit of risk. Jpmorgan Equity Income is currently generating about 0.1 per unit of risk. If you would invest 6,840 in Multimedia Portfolio Multimedia on August 31, 2024 and sell it today you would earn a total of 4,333 from holding Multimedia Portfolio Multimedia or generate 63.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multimedia Portfolio Multimedi vs. Jpmorgan Equity Income
Performance |
| Timeline |
| Multimedia Portfolio |
| Jpmorgan Equity Income |
Multimedia Portfolio and Jpmorgan Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multimedia Portfolio and Jpmorgan Equity
The main advantage of trading using opposite Multimedia Portfolio and Jpmorgan Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multimedia Portfolio position performs unexpectedly, Jpmorgan Equity 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 Equity will offset losses from the drop in Jpmorgan Equity's long position.The idea behind Multimedia Portfolio Multimedia and Jpmorgan Equity Income 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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