Correlation Between JPM Global and IShares Continental

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

By analyzing existing cross correlation between JPM Global Equity and iShares Continental European, you can compare the effects of market volatilities on JPM Global and IShares Continental 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 Global with a short position of IShares Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM Global and IShares Continental.

Diversification Opportunities for JPM Global and IShares Continental

0.15

Correlation Coefficient

JPM Global  IShares Continental

Average diversification

The 3 months correlation between JPM and IShares is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding JPM Global Equity and iShares Continental European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Continental and JPM Global 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 Global Equity are associated (or correlated) with IShares Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Continental has no effect on the direction of JPM Global i.e., JPM Global and IShares Continental go up and down completely randomly.

Pair Corralation between JPM Global and IShares Continental

Assuming the 90 days trading horizon JPM Global is expected to generate 14.81 times less return on investment than IShares Continental. But when comparing it to its historical volatility, JPM Global Equity is 1.26 times less risky than IShares Continental. It trades about 0.01 of its potential returns per unit of risk. iShares Continental European is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  109.00  in iShares Continental European on December 28, 2024 and sell it today you would earn a total of  11.00  from holding iShares Continental European or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

JPM Global Equity  vs.  iShares Continental European

JPM Global Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPM Global Equity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, JPM Global is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

iShares Continental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Continental European are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unsteady basic indicators, IShares Continental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JPM Global and IShares Continental

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

The idea behind JPM Global Equity and iShares Continental European 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.