Correlation Between FlexShares STOXX and JP Morgan

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

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

Diversification Opportunities for FlexShares STOXX and JP Morgan

0.9

Correlation Coefficient

FlexShares STOXX  JP Morgan

Almost no diversification

The 3 months correlation between FlexShares and JCTR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX ESG 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 FlexShares STOXX 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 FlexShares STOXX ESG 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 FlexShares STOXX i.e., FlexShares STOXX and JP Morgan go up and down completely randomly.

Pair Corralation between FlexShares STOXX and JP Morgan

Considering the 90-day investment horizon FlexShares STOXX is expected to generate 1.11 times less return on investment than JP Morgan. But when comparing it to its historical volatility, FlexShares STOXX ESG is 1.06 times less risky than JP Morgan. It trades about 0.11 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,377  in JP Morgan Exchange Traded on October 26, 2024 and sell it today you would earn a total of  2,898  from holding JP Morgan Exchange Traded or generate 53.89% return on investment over 90 days.

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

FlexShares STOXX ESG  vs.  JP Morgan Exchange Traded

FlexShares STOXX ESG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX ESG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FlexShares STOXX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

JP Morgan Exchange

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, JP Morgan is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FlexShares STOXX and JP Morgan

The main advantage of trading using opposite FlexShares STOXX and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX 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 FlexShares STOXX ESG 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.