Correlation Between JPMorgan International and JPMorgan Municipal
Can any of the company-specific risk be diversified away by investing in both JPMorgan International and JPMorgan Municipal 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 JPMorgan Municipal 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 JPMorgan Municipal, you can compare the effects of market volatilities on JPMorgan International and JPMorgan Municipal 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 JPMorgan Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan International and JPMorgan Municipal.
Diversification Opportunities for JPMorgan International and JPMorgan Municipal
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between JPMorgan and JPMorgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan International Bond and JPMorgan Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Municipal 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 JPMorgan Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Municipal has no effect on the direction of JPMorgan International i.e., JPMorgan International and JPMorgan Municipal go up and down completely randomly.
Pair Corralation between JPMorgan International and JPMorgan Municipal
Given the investment horizon of 90 days JPMorgan International Bond is expected to generate 0.82 times more return on investment than JPMorgan Municipal. However, JPMorgan International Bond is 1.22 times less risky than JPMorgan Municipal. It trades about 0.06 of its potential returns per unit of risk. JPMorgan Municipal is currently generating about 0.03 per unit of risk. If you would invest 4,777 in JPMorgan International Bond on September 12, 2024 and sell it today you would earn a total of 29.00 from holding JPMorgan International Bond or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan International Bond vs. JPMorgan Municipal
Performance |
| Timeline |
| JPMorgan International |
| JPMorgan Municipal |
JPMorgan International and JPMorgan Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan International and JPMorgan Municipal
The main advantage of trading using opposite JPMorgan International and JPMorgan Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan International position performs unexpectedly, JPMorgan Municipal 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 Municipal will offset losses from the drop in JPMorgan Municipal's long position.The idea behind JPMorgan International Bond and JPMorgan Municipal 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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