Correlation Between JPMorgan Equity and SPDR SP

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

By analyzing existing cross correlation between JPMorgan Equity Premium and SPDR SP World, you can compare the effects of market volatilities on JPMorgan Equity and SPDR SP 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 Equity with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Equity and SPDR SP.

Diversification Opportunities for JPMorgan Equity and SPDR SP

0.96

Correlation Coefficient

JPMorgan Equity  SPDR SP

Almost no diversification

The 3 months correlation between JPMorgan and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and SPDR SP World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP World and JPMorgan Equity 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 Equity Premium are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP World has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and SPDR SP go up and down completely randomly.

Pair Corralation between JPMorgan Equity and SPDR SP

Assuming the 90 days trading horizon JPMorgan Equity Premium is expected to generate 1.97 times more return on investment than SPDR SP. However, JPMorgan Equity is 1.97 times more volatile than SPDR SP World. It trades about 0.14 of its potential returns per unit of risk. SPDR SP World is currently generating about 0.25 per unit of risk. If you would invest  5,143  in JPMorgan Equity Premium on September 26, 2024 and sell it today you would earn a total of  557.00  from holding JPMorgan Equity Premium or generate 10.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

JPMorgan Equity Premium  vs.  SPDR SP World

JPMorgan Equity Premium

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JPMorgan Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR SP World

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP World are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JPMorgan Equity and SPDR SP

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

The idea behind JPMorgan Equity Premium and SPDR SP World 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.