Correlation Between JPM Global and JPM Europe
Can any of the company-specific risk be diversified away by investing in both JPM Global and JPM Europe 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 Global and JPM Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPM Global Natural and JPM Europe Small, you can compare the effects of market volatilities on JPM Global and JPM Europe 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 Global with a short position of JPM Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM Global and JPM Europe.
Diversification Opportunities for JPM Global and JPM Europe
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between JPM and JPM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding JPM Global Natural and JPM Europe Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM Europe Small and JPM Global 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 Global Natural are associated (or correlated) with JPM Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM Europe Small has no effect on the direction of JPM Global i.e., JPM Global and JPM Europe go up and down completely randomly.
Pair Corralation between JPM Global and JPM Europe
Assuming the 90 days trading horizon JPM Global is expected to generate 1.2 times less return on investment than JPM Europe. In addition to that, JPM Global is 1.39 times more volatile than JPM Europe Small. It trades about 0.04 of its total potential returns per unit of risk. JPM Europe Small is currently generating about 0.06 per unit of volatility. If you would invest 8,359 in JPM Europe Small on November 28, 2024 and sell it today you would earn a total of 1,074 from holding JPM Europe Small or generate 12.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPM Global Natural vs. JPM Europe Small
Performance |
| Timeline |
| JPM Global Natural |
| JPM Europe Small |
JPM Global and JPM Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPM Global and JPM Europe
The main advantage of trading using opposite JPM Global and JPM Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPM Global position performs unexpectedly, JPM Europe 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 Europe will offset losses from the drop in JPM Europe's long position.| JPM Global vs. Groupama Entreprises N | JPM Global vs. Renaissance Europe C | JPM Global vs. Superior Plus Corp | JPM Global vs. Origin Agritech |
| JPM Europe vs. Groupama Entreprises N | JPM Europe vs. Renaissance Europe C | JPM Europe vs. Superior Plus Corp | JPM Europe vs. Origin Agritech |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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