Correlation Between Dimensional World and JP Morgan

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

By analyzing existing cross correlation between Dimensional World ex and JP Morgan Exchange Traded, you can compare the effects of market volatilities on Dimensional World and JP Morgan 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 Dimensional World with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional World and JP Morgan.

Diversification Opportunities for Dimensional World and JP Morgan

0.93

Correlation Coefficient

Dimensional World  JP Morgan

Almost no diversification

The 3 months correlation between Dimensional and JIRE is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional World ex and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and Dimensional World 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 Dimensional World ex are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of Dimensional World i.e., Dimensional World and JP Morgan go up and down completely randomly.

Pair Corralation between Dimensional World and JP Morgan

Given the investment horizon of 90 days Dimensional World is expected to generate 1.69 times less return on investment than JP Morgan. But when comparing it to its historical volatility, Dimensional World ex is 1.15 times less risky than JP Morgan. It trades about 0.08 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,041  in JP Morgan Exchange Traded on November 28, 2024 and sell it today you would earn a total of  319.00  from holding JP Morgan Exchange Traded or generate 5.28% return on investment over 90 days.

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

Dimensional World ex  vs.  JP Morgan Exchange Traded

Dimensional World

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional World ex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Dimensional World is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

JP Morgan Exchange

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, JP Morgan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional World and JP Morgan

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

The idea behind Dimensional World ex and JP Morgan Exchange Traded 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.