Correlation Between JPM America and R Co

Can any of the company-specific risk be diversified away by investing in both JPM America and R Co 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 America and R Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JPM America Equity and R co Valor F, you can compare the effects of market volatilities on JPM America and R Co 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 America with a short position of R Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM America and R Co.

Diversification Opportunities for JPM America and R Co

0.78

Correlation Coefficient

JPM America  R Co

Poor diversification

The 3 months correlation between JPM and 0P00017SX2 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding JPM America Equity and R co Valor F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R co Valor and JPM America 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 America Equity are associated (or correlated) with R Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R co Valor has no effect on the direction of JPM America i.e., JPM America and R Co go up and down completely randomly.

Pair Corralation between JPM America and R Co

Assuming the 90 days trading horizon JPM America Equity is expected to generate 1.64 times more return on investment than R Co. However, JPM America is 1.64 times more volatile than R co Valor F. It trades about 0.25 of its potential returns per unit of risk. R co Valor F is currently generating about 0.24 per unit of risk. If you would invest  37,731  in JPM America Equity on September 9, 2024 and sell it today you would earn a total of  7,013  from holding JPM America Equity or generate 18.59% return on investment over 90 days.

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

JPM America Equity  vs.  R co Valor F

JPM America Equity

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unsteady technical and fundamental indicators, JPM America exhibited solid returns over the last few months and may actually be approaching a breakup point.

R co Valor

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, R Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JPM America and R Co

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

The idea behind JPM America Equity and R co Valor F 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.