Correlation Between First Trust and JPMorgan Ultra

Can any of the company-specific risk be diversified away by investing in both First Trust and JPMorgan Ultra 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 First Trust and JPMorgan Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Enhanced and JPMorgan Ultra Short Income, you can compare the effects of market volatilities on First Trust and JPMorgan Ultra 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 First Trust with a short position of JPMorgan Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and JPMorgan Ultra.

Diversification Opportunities for First Trust and JPMorgan Ultra

0.99

Correlation Coefficient

First Trust  JPMorgan Ultra

No risk reduction

The 3 months correlation between First and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and JPMorgan Ultra Short Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Ultra Short and First Trust 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 First Trust Enhanced are associated (or correlated) with JPMorgan Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Ultra Short has no effect on the direction of First Trust i.e., First Trust and JPMorgan Ultra go up and down completely randomly.

Pair Corralation between First Trust and JPMorgan Ultra

Given the investment horizon of 90 days First Trust is expected to generate 1.01 times less return on investment than JPMorgan Ultra. But when comparing it to its historical volatility, First Trust Enhanced is 1.24 times less risky than JPMorgan Ultra. It trades about 0.55 of its potential returns per unit of risk. JPMorgan Ultra Short Income is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  5,003  in JPMorgan Ultra Short Income on September 2, 2024 and sell it today you would earn a total of  56.00  from holding JPMorgan Ultra Short Income or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

First Trust Enhanced  vs.  JPMorgan Ultra Short Income

First Trust Enhanced

Risk-Adjusted Performance

43 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 43 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

JPMorgan Ultra Short

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Ultra Short Income are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JPMorgan Ultra is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and JPMorgan Ultra

The main advantage of trading using opposite First Trust and JPMorgan Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, JPMorgan Ultra 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 Ultra will offset losses from the drop in JPMorgan Ultra's long position.

The idea behind First Trust Enhanced and JPMorgan Ultra Short Income 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.