Correlation Between JP Morgan and Dow Jones
Can any of the company-specific risk be diversified away by investing in both JP Morgan and Dow Jones 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 JP Morgan and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JP Morgan Exchange Traded and Dow Jones Industrial, you can compare the effects of market volatilities on JP Morgan and Dow Jones 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 JP Morgan with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of JP Morgan and Dow Jones.
Diversification Opportunities for JP Morgan and Dow Jones
Excellent diversification
The 3 months correlation between JBND and Dow is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Exchange Traded and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and JP Morgan 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 JP Morgan Exchange Traded are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of JP Morgan i.e., JP Morgan and Dow Jones go up and down completely randomly.
Pair Corralation between JP Morgan and Dow Jones
Given the investment horizon of 90 days JP Morgan is expected to generate 1.98 times less return on investment than Dow Jones. But when comparing it to its historical volatility, JP Morgan Exchange Traded is 1.98 times less risky than Dow Jones. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,312,774 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,116,877 from holding Dow Jones Industrial or generate 33.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 71.83% |
| Values | Daily Returns |
JP Morgan Exchange Traded vs. Dow Jones Industrial
Performance |
| Timeline |
JP Morgan and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
JP Morgan Exchange Traded
Pair trading matchups for JP Morgan
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with JP Morgan and Dow Jones
The main advantage of trading using opposite JP Morgan and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| JP Morgan vs. iShares MSCI EAFE | JP Morgan vs. iShares iBoxx Investment | JP Morgan vs. iShares TIPS Bond | JP Morgan vs. iShares 1 3 Year |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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