Correlation Between Pacteo Actions and JPM Europe

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

By analyzing existing cross correlation between Pacteo Actions Europe and JPM Europe Small, you can compare the effects of market volatilities on Pacteo Actions and JPM Europe 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 Pacteo Actions with a short position of JPM Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacteo Actions and JPM Europe.

Diversification Opportunities for Pacteo Actions and JPM Europe

0.54

Correlation Coefficient

Pacteo Actions  JPM Europe

Very weak diversification

The 3 months correlation between Pacteo and JPM is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pacteo Actions Europe and JPM Europe Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM Europe Small and Pacteo Actions 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 Pacteo Actions Europe are associated (or correlated) with JPM Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM Europe Small has no effect on the direction of Pacteo Actions i.e., Pacteo Actions and JPM Europe go up and down completely randomly.

Pair Corralation between Pacteo Actions and JPM Europe

Assuming the 90 days trading horizon Pacteo Actions Europe is expected to generate 1.19 times more return on investment than JPM Europe. However, Pacteo Actions is 1.19 times more volatile than JPM Europe Small. It trades about 0.28 of its potential returns per unit of risk. JPM Europe Small is currently generating about 0.02 per unit of risk. If you would invest  1,638  in Pacteo Actions Europe on October 23, 2024 and sell it today you would earn a total of  69.00  from holding Pacteo Actions Europe or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

Pacteo Actions Europe  vs.  JPM Europe Small

Pacteo Actions Europe

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacteo Actions Europe are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Pacteo Actions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JPM Europe Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM Europe Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, JPM Europe is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pacteo Actions and JPM Europe

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

The idea behind Pacteo Actions Europe and JPM Europe Small 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.