Correlation Between International Business and JP Morgan

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

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

Diversification Opportunities for International Business and JP Morgan

0.77

Correlation Coefficient

International Business  JP Morgan

Poor diversification

The 3 months correlation between International and JPIE is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and JP Morgan go up and down completely randomly.

Pair Corralation between International Business and JP Morgan

Considering the 90-day investment horizon International Business Machines is expected to generate 18.97 times more return on investment than JP Morgan. However, International Business is 18.97 times more volatile than JP Morgan Exchange Traded. It trades about 0.09 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.27 per unit of risk. If you would invest  21,879  in International Business Machines on December 29, 2024 and sell it today you would earn a total of  2,521  from holding International Business Machines or generate 11.52% return on investment over 90 days.

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

International Business Machine  vs.  JP Morgan Exchange Traded

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

JP Morgan Exchange

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, JP Morgan is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with International Business and JP Morgan

The main advantage of trading using opposite International Business and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.