Correlation Between Northern Lights and JPMorgan Fundamental

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

By analyzing existing cross correlation between Northern Lights and JPMorgan Fundamental Data, you can compare the effects of market volatilities on Northern Lights and JPMorgan Fundamental 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 Northern Lights with a short position of JPMorgan Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and JPMorgan Fundamental.

Diversification Opportunities for Northern Lights and JPMorgan Fundamental

0.88

Correlation Coefficient

Northern Lights  JPMorgan Fundamental

Very poor diversification

The 3 months correlation between Northern and JPMorgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and JPMorgan Fundamental Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Fundamental Data and Northern Lights 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 Northern Lights are associated (or correlated) with JPMorgan Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Fundamental Data has no effect on the direction of Northern Lights i.e., Northern Lights and JPMorgan Fundamental go up and down completely randomly.

Pair Corralation between Northern Lights and JPMorgan Fundamental

Given the investment horizon of 90 days Northern Lights is expected to generate 2.2 times less return on investment than JPMorgan Fundamental. In addition to that, Northern Lights is 1.04 times more volatile than JPMorgan Fundamental Data. It trades about 0.11 of its total potential returns per unit of risk. JPMorgan Fundamental Data is currently generating about 0.26 per unit of volatility. If you would invest  4,992  in JPMorgan Fundamental Data on September 12, 2024 and sell it today you would earn a total of  870.00  from holding JPMorgan Fundamental Data or generate 17.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	23.59%
Values	Daily Returns

Northern Lights  vs.  JPMorgan Fundamental Data

Northern Lights

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan Fundamental Data

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Fundamental Data are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, JPMorgan Fundamental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Northern Lights and JPMorgan Fundamental

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

The idea behind Northern Lights and JPMorgan Fundamental Data 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.