Correlation Between Nova Europe and JPM America

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

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

Diversification Opportunities for Nova Europe and JPM America

-0.81

Correlation Coefficient

Nova Europe  JPM America

Pay attention - limited upside

The 3 months correlation between Nova and JPM is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nova Europe ISR and JPM America Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM America Equity and Nova Europe 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 Nova Europe ISR are associated (or correlated) with JPM America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM America Equity has no effect on the direction of Nova Europe i.e., Nova Europe and JPM America go up and down completely randomly.

Pair Corralation between Nova Europe and JPM America

Assuming the 90 days trading horizon Nova Europe ISR is expected to under-perform the JPM America. But the fund apears to be less risky and, when comparing its historical volatility, Nova Europe ISR is 1.83 times less risky than JPM America. The fund trades about -0.18 of its potential returns per unit of risk. The JPM America Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  41,124  in JPM America Equity on October 13, 2024 and sell it today you would earn a total of  2,963  from holding JPM America Equity or generate 7.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nova Europe ISR  vs.  JPM America Equity

Nova Europe ISR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Europe ISR has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

JPM America Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unsteady technical and fundamental indicators, JPM America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nova Europe and JPM America

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

The idea behind Nova Europe ISR and JPM America Equity 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.