Correlation Between Main Buywrite and JPMorgan Equity

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

By analyzing existing cross correlation between Main Buywrite ETF and JPMorgan Equity Premium, you can compare the effects of market volatilities on Main Buywrite and JPMorgan Equity 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 Main Buywrite with a short position of JPMorgan Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Buywrite and JPMorgan Equity.

Diversification Opportunities for Main Buywrite and JPMorgan Equity

0.86

Correlation Coefficient

Main Buywrite  JPMorgan Equity

Very poor diversification

The 3 months correlation between Main and JPMorgan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Main Buywrite ETF and JPMorgan Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Equity Premium and Main Buywrite 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 Main Buywrite ETF are associated (or correlated) with JPMorgan Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Equity Premium has no effect on the direction of Main Buywrite i.e., Main Buywrite and JPMorgan Equity go up and down completely randomly.

Pair Corralation between Main Buywrite and JPMorgan Equity

Given the investment horizon of 90 days Main Buywrite ETF is expected to under-perform the JPMorgan Equity. But the etf apears to be less risky and, when comparing its historical volatility, Main Buywrite ETF is 1.5 times less risky than JPMorgan Equity. The etf trades about -0.01 of its potential returns per unit of risk. The JPMorgan Equity Premium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,693  in JPMorgan Equity Premium on December 28, 2024 and sell it today you would earn a total of  45.00  from holding JPMorgan Equity Premium or generate 0.79% return on investment over 90 days.

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

Main Buywrite ETF  vs.  JPMorgan Equity Premium

Main Buywrite ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Buywrite ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Main Buywrite is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JPMorgan Equity Premium

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Main Buywrite and JPMorgan Equity

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

The idea behind Main Buywrite ETF and JPMorgan Equity Premium 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.