Correlation Between JPMorgan Equity and IShares Trust

Can any of the company-specific risk be diversified away by investing in both JPMorgan Equity and IShares Trust 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 IShares Trust 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 iShares Trust, you can compare the effects of market volatilities on JPMorgan Equity and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Equity and IShares Trust.

Diversification Opportunities for JPMorgan Equity and IShares Trust

0.91

Correlation Coefficient

JPMorgan Equity  IShares Trust

Almost no diversification

The 3 months correlation between JPMorgan and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and IShares Trust go up and down completely randomly.

Pair Corralation between JPMorgan Equity and IShares Trust

Given the investment horizon of 90 days JPMorgan Equity Premium is expected to generate 0.68 times more return on investment than IShares Trust. However, JPMorgan Equity Premium is 1.48 times less risky than IShares Trust. It trades about 0.24 of its potential returns per unit of risk. iShares Trust is currently generating about 0.15 per unit of risk. If you would invest  5,734  in JPMorgan Equity Premium on September 2, 2024 and sell it today you would earn a total of  349.00  from holding JPMorgan Equity Premium or generate 6.09% return on investment over 90 days.

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

JPMorgan Equity Premium  vs.  iShares Trust

JPMorgan Equity Premium

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

iShares Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JPMorgan Equity and IShares Trust

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

The idea behind JPMorgan Equity Premium and iShares Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.