Correlation Between Pareto Nordic and JPM America

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

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

Diversification Opportunities for Pareto Nordic and JPM America

-0.83

Correlation Coefficient

Pareto Nordic  JPM America

Pay attention - limited upside

The 3 months correlation between Pareto and JPM is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pareto Nordic Equity 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 Pareto Nordic 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 Pareto Nordic Equity 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 Pareto Nordic i.e., Pareto Nordic and JPM America go up and down completely randomly.

Pair Corralation between Pareto Nordic and JPM America

Assuming the 90 days trading horizon Pareto Nordic Equity is expected to generate 1.48 times more return on investment than JPM America. However, Pareto Nordic is 1.48 times more volatile than JPM America Equity. It trades about 0.12 of its potential returns per unit of risk. JPM America Equity is currently generating about -0.1 per unit of risk. If you would invest  15,143  in Pareto Nordic Equity on September 23, 2024 and sell it today you would earn a total of  378.00  from holding Pareto Nordic Equity or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Pareto Nordic Equity  vs.  JPM America Equity

Pareto Nordic Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pareto Nordic Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Pareto Nordic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

JPM America Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 10 (%) 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 January 2025.

Pair Trading with Pareto Nordic and JPM America

The main advantage of trading using opposite Pareto Nordic and JPM America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pareto Nordic 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 Pareto Nordic Equity 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.