Correlation Between JPM America and JPM Emerging
Can any of the company-specific risk be diversified away by investing in both JPM America and JPM Emerging 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 JPM America and JPM Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPM America Equity and JPM Emerging Markets, you can compare the effects of market volatilities on JPM America and JPM Emerging 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 JPM America with a short position of JPM Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM America and JPM Emerging.
Diversification Opportunities for JPM America and JPM Emerging
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between JPM and JPM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding JPM America Equity and JPM Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM Emerging Markets and JPM America 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 JPM America Equity are associated (or correlated) with JPM Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM Emerging Markets has no effect on the direction of JPM America i.e., JPM America and JPM Emerging go up and down completely randomly.
Pair Corralation between JPM America and JPM Emerging
Assuming the 90 days trading horizon JPM America Equity is expected to generate 1.11 times more return on investment than JPM Emerging. However, JPM America is 1.11 times more volatile than JPM Emerging Markets. It trades about 0.12 of its potential returns per unit of risk. JPM Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest 37,407 in JPM America Equity on September 3, 2024 and sell it today you would earn a total of 6,709 from holding JPM America Equity or generate 17.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPM America Equity vs. JPM Emerging Markets
Performance |
| Timeline |
| JPM America Equity |
| JPM Emerging Markets |
JPM America and JPM Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPM America and JPM Emerging
The main advantage of trading using opposite JPM America and JPM Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPM America position performs unexpectedly, JPM Emerging 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 JPM Emerging will offset losses from the drop in JPM Emerging's long position.| JPM America vs. Groupama Entreprises N | JPM America vs. Renaissance Europe C | JPM America vs. Superior Plus Corp | JPM America vs. Origin Agritech |
| JPM Emerging vs. JPM America Equity | JPM Emerging vs. JPM Global Natural | JPM Emerging vs. JPM Europe Small | JPM Emerging vs. Esfera Robotics R |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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