Correlation Between JPM China and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both JPM China and Vanguard FTSE 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 China and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPM China A and Vanguard FTSE Developed, you can compare the effects of market volatilities on JPM China and Vanguard FTSE 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 China with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM China and Vanguard FTSE.
Diversification Opportunities for JPM China and Vanguard FTSE
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between JPM and Vanguard is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding JPM China A and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and JPM China 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 China A are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of JPM China i.e., JPM China and Vanguard FTSE go up and down completely randomly.
Pair Corralation between JPM China and Vanguard FTSE
Assuming the 90 days trading horizon JPM China A is expected to under-perform the Vanguard FTSE. In addition to that, JPM China is 1.62 times more volatile than Vanguard FTSE Developed. It trades about -0.01 of its total potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.04 per unit of volatility. If you would invest 4,049 in Vanguard FTSE Developed on September 3, 2024 and sell it today you would earn a total of 716.00 from holding Vanguard FTSE Developed or generate 17.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.58% |
| Values | Daily Returns |
JPM China A vs. Vanguard FTSE Developed
Performance |
| Timeline |
| JPM China A |
| Vanguard FTSE Developed |
JPM China and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPM China and Vanguard FTSE
The main advantage of trading using opposite JPM China and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPM China position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| JPM China vs. Vanguard FTSE Developed | JPM China vs. Leverage Shares 2x | JPM China vs. Amundi Index Solutions | JPM China vs. Amundi Index Solutions |
| Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard Global Aggregate | Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard FTSE All World |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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