Correlation Between First Trust and JP Morgan
Can any of the company-specific risk be diversified away by investing in both First Trust and JP Morgan 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 First Trust and JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and JP Morgan Exchange Traded, you can compare the effects of market volatilities on First Trust and JP Morgan 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 First Trust with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and JP Morgan.
Diversification Opportunities for First Trust and JP Morgan
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and JADE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and First Trust 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 First Trust Dorsey are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of First Trust i.e., First Trust and JP Morgan go up and down completely randomly.
Pair Corralation between First Trust and JP Morgan
Allowing for the 90-day total investment horizon First Trust Dorsey is expected to generate 1.12 times more return on investment than JP Morgan. However, First Trust is 1.12 times more volatile than JP Morgan Exchange Traded. It trades about 0.18 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.08 per unit of risk. If you would invest 5,133 in First Trust Dorsey on September 4, 2024 and sell it today you would earn a total of 1,078 from holding First Trust Dorsey or generate 21.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. JP Morgan Exchange Traded
Performance |
| Timeline |
| First Trust Dorsey |
| JP Morgan Exchange |
First Trust and JP Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and JP Morgan
The main advantage of trading using opposite First Trust and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, JP Morgan 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 JP Morgan will offset losses from the drop in JP Morgan's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| JP Morgan vs. SCOR PK | JP Morgan vs. HUMANA INC | JP Morgan vs. Aquagold International | JP Morgan vs. Barloworld Ltd ADR |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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