Correlation Between JPMorgan Equity and FT Vest

Can any of the company-specific risk be diversified away by investing in both JPMorgan Equity and FT Vest 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 FT Vest 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 FT Vest SMID, you can compare the effects of market volatilities on JPMorgan Equity and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Equity and FT Vest.

Diversification Opportunities for JPMorgan Equity and FT Vest

0.93

Correlation Coefficient

JPMorgan Equity  FT Vest

Almost no diversification

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

Pair Corralation between JPMorgan Equity and FT Vest

Given the investment horizon of 90 days JPMorgan Equity is expected to generate 1.69 times less return on investment than FT Vest. But when comparing it to its historical volatility, JPMorgan Equity Premium is 2.25 times less risky than FT Vest. It trades about 0.09 of its potential returns per unit of risk. FT Vest SMID is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,755  in FT Vest SMID on October 23, 2024 and sell it today you would earn a total of  491.00  from holding FT Vest SMID or generate 27.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	73.48%
Values	Daily Returns

JPMorgan Equity Premium  vs.  FT Vest SMID

JPMorgan Equity Premium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Equity Premium has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

FT Vest SMID

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with JPMorgan Equity and FT Vest

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

The idea behind JPMorgan Equity Premium and FT Vest SMID 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 Transaction History module to view history of all your transactions and understand their impact on performance.