Correlation Between JPMorgan International and IShares International
Can any of the company-specific risk be diversified away by investing in both JPMorgan International and IShares International 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 JPMorgan International and IShares International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPMorgan International Bond and iShares International Treasury, you can compare the effects of market volatilities on JPMorgan International and IShares International 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 JPMorgan International with a short position of IShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan International and IShares International.
Diversification Opportunities for JPMorgan International and IShares International
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JPMorgan and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan International Bond and iShares International Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and JPMorgan International 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 JPMorgan International Bond are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of JPMorgan International i.e., JPMorgan International and IShares International go up and down completely randomly.
Pair Corralation between JPMorgan International and IShares International
Given the investment horizon of 90 days JPMorgan International Bond is expected to generate 0.3 times more return on investment than IShares International. However, JPMorgan International Bond is 3.35 times less risky than IShares International. It trades about 0.0 of its potential returns per unit of risk. iShares International Treasury is currently generating about -0.17 per unit of risk. If you would invest 4,771 in JPMorgan International Bond on August 26, 2024 and sell it today you would earn a total of 1.00 from holding JPMorgan International Bond or generate 0.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan International Bond vs. iShares International Treasury
Performance |
| Timeline |
| JPMorgan International |
| iShares International |
JPMorgan International and IShares International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan International and IShares International
The main advantage of trading using opposite JPMorgan International and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan International position performs unexpectedly, IShares International 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 IShares International will offset losses from the drop in IShares International's long position.The idea behind JPMorgan International Bond and iShares International Treasury 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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