Correlation Between JPMorgan Equity and Main Buywrite

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

By analyzing existing cross correlation between JPMorgan Equity Premium and Main Buywrite ETF, you can compare the effects of market volatilities on JPMorgan Equity and Main Buywrite 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 JPMorgan Equity with a short position of Main Buywrite. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Equity and Main Buywrite.

Diversification Opportunities for JPMorgan Equity and Main Buywrite

0.86

Correlation Coefficient

JPMorgan Equity  Main Buywrite

Very poor diversification

The 3 months correlation between JPMorgan and Main is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and Main Buywrite ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Buywrite ETF and JPMorgan Equity 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 JPMorgan Equity Premium are associated (or correlated) with Main Buywrite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Buywrite ETF has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and Main Buywrite go up and down completely randomly.

Pair Corralation between JPMorgan Equity and Main Buywrite

Given the investment horizon of 90 days JPMorgan Equity Premium is expected to generate 1.5 times more return on investment than Main Buywrite. However, JPMorgan Equity is 1.5 times more volatile than Main Buywrite ETF. It trades about 0.02 of its potential returns per unit of risk. Main Buywrite ETF is currently generating about -0.01 per unit of risk. If you would invest  5,693  in JPMorgan Equity Premium on December 28, 2024 and sell it today you would earn a total of  45.00  from holding JPMorgan Equity Premium or generate 0.79% return on investment over 90 days.

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

JPMorgan Equity Premium  vs.  Main Buywrite ETF

JPMorgan Equity Premium

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Main Buywrite ETF

Risk-Adjusted Performance

Very Weak

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

Pair Trading with JPMorgan Equity and Main Buywrite

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

The idea behind JPMorgan Equity Premium and Main Buywrite ETF 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.