Correlation Between JPMorgan Nasdaq and Invesco SP

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

By analyzing existing cross correlation between JPMorgan Nasdaq Equity and Invesco SP 500, you can compare the effects of market volatilities on JPMorgan Nasdaq and Invesco SP 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 Nasdaq with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Nasdaq and Invesco SP.

Diversification Opportunities for JPMorgan Nasdaq and Invesco SP

0.97

Correlation Coefficient

JPMorgan Nasdaq  Invesco SP

Almost no diversification

The 3 months correlation between JPMorgan and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Nasdaq Equity and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and JPMorgan Nasdaq 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 Nasdaq Equity are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of JPMorgan Nasdaq i.e., JPMorgan Nasdaq and Invesco SP go up and down completely randomly.

Pair Corralation between JPMorgan Nasdaq and Invesco SP

Given the investment horizon of 90 days JPMorgan Nasdaq Equity is expected to generate 0.81 times more return on investment than Invesco SP. However, JPMorgan Nasdaq Equity is 1.23 times less risky than Invesco SP. It trades about 0.15 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 per unit of risk. If you would invest  3,344  in JPMorgan Nasdaq Equity on September 19, 2024 and sell it today you would earn a total of  2,461  from holding JPMorgan Nasdaq Equity or generate 73.59% return on investment over 90 days.

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

JPMorgan Nasdaq Equity  vs.  Invesco SP 500

JPMorgan Nasdaq Equity

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Nasdaq Equity are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, JPMorgan Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Invesco SP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with JPMorgan Nasdaq and Invesco SP

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

The idea behind JPMorgan Nasdaq Equity and Invesco SP 500 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.