Correlation Between First Trust and JPMorgan Active

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

By analyzing existing cross correlation between First Trust Value and JPMorgan Active Value, you can compare the effects of market volatilities on First Trust and JPMorgan Active 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 Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and JPMorgan Active.

Diversification Opportunities for First Trust and JPMorgan Active

0.44

Correlation Coefficient

First Trust  JPMorgan Active

Very weak diversification

The 3 months correlation between First and JPMorgan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and JPMorgan Active Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Active Value 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 Value are associated (or correlated) with JPMorgan Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Active Value has no effect on the direction of First Trust i.e., First Trust and JPMorgan Active go up and down completely randomly.

Pair Corralation between First Trust and JPMorgan Active

Considering the 90-day investment horizon First Trust Value is expected to generate 0.93 times more return on investment than JPMorgan Active. However, First Trust Value is 1.08 times less risky than JPMorgan Active. It trades about 0.06 of its potential returns per unit of risk. JPMorgan Active Value is currently generating about 0.03 per unit of risk. If you would invest  4,348  in First Trust Value on December 28, 2024 and sell it today you would earn a total of  102.00  from holding First Trust Value or generate 2.35% return on investment over 90 days.

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

First Trust Value  vs.  JPMorgan Active Value

First Trust Value

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Value are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan Active Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Active Value are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JPMorgan Active is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and JPMorgan Active

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

The idea behind First Trust Value and JPMorgan Active Value 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.