Correlation Between IE00B0H4TS55 and JPM Europe

Can any of the company-specific risk be diversified away by investing in both IE00B0H4TS55 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 IE00B0H4TS55 and JPM Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IE00B0H4TS55 and JPM Europe Small, you can compare the effects of market volatilities on IE00B0H4TS55 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 IE00B0H4TS55 with a short position of JPM Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of IE00B0H4TS55 and JPM Europe.

Diversification Opportunities for IE00B0H4TS55 and JPM Europe

0.76

Correlation Coefficient

IE00B0H4TS55  JPM Europe

Poor diversification

The 3 months correlation between IE00B0H4TS55 and JPM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding IE00B0H4TS55 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 IE00B0H4TS55 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 IE00B0H4TS55 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 IE00B0H4TS55 i.e., IE00B0H4TS55 and JPM Europe go up and down completely randomly.

Pair Corralation between IE00B0H4TS55 and JPM Europe

Assuming the 90 days trading horizon IE00B0H4TS55 is expected to generate 3.95 times less return on investment than JPM Europe. But when comparing it to its historical volatility, IE00B0H4TS55 is 4.12 times less risky than JPM Europe. It trades about 0.16 of its potential returns per unit of risk. JPM Europe Small is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  8,863  in JPM Europe Small on December 26, 2024 and sell it today you would earn a total of  698.00  from holding JPM Europe Small or generate 7.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

IE00B0H4TS55  vs.  JPM Europe Small

IE00B0H4TS55

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IE00B0H4TS55 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, IE00B0H4TS55 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

JPM Europe Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPM Europe Small are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, JPM Europe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IE00B0H4TS55 and JPM Europe

The main advantage of trading using opposite IE00B0H4TS55 and JPM Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IE00B0H4TS55 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 IE00B0H4TS55 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.