Correlation Between First Trust and JPMorgan Diversified

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

By analyzing existing cross correlation between First Trust Dorsey and JPMorgan Diversified Return, you can compare the effects of market volatilities on First Trust and JPMorgan Diversified 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 First Trust with a short position of JPMorgan Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and JPMorgan Diversified.

Diversification Opportunities for First Trust and JPMorgan Diversified

0.93

Correlation Coefficient

First Trust  JPMorgan Diversified

Almost no diversification

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

Pair Corralation between First Trust and JPMorgan Diversified

Allowing for the 90-day total investment horizon First Trust Dorsey is expected to under-perform the JPMorgan Diversified. In addition to that, First Trust is 1.44 times more volatile than JPMorgan Diversified Return. It trades about -0.07 of its total potential returns per unit of risk. JPMorgan Diversified Return is currently generating about -0.01 per unit of volatility. If you would invest  10,193  in JPMorgan Diversified Return on December 28, 2024 and sell it today you would lose (94.00) from holding JPMorgan Diversified Return or give up 0.92% of portfolio value over 90 days.

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

First Trust Dorsey  vs.  JPMorgan Diversified Return

First Trust Dorsey

Risk-Adjusted Performance

Very Weak

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

JPMorgan Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Diversified Return has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, JPMorgan Diversified is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and JPMorgan Diversified

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

The idea behind First Trust Dorsey and JPMorgan Diversified Return 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.