Correlation Between JP Morgan and Xtrackers FTSE

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

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

Diversification Opportunities for JP Morgan and Xtrackers FTSE

0.87

Correlation Coefficient

JP Morgan  Xtrackers FTSE

Very poor diversification

The 3 months correlation between JIRE and Xtrackers is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Exchange Traded and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed and JP Morgan 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 JP Morgan Exchange Traded are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of JP Morgan i.e., JP Morgan and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between JP Morgan and Xtrackers FTSE

Given the investment horizon of 90 days JP Morgan is expected to generate 1.08 times less return on investment than Xtrackers FTSE. But when comparing it to its historical volatility, JP Morgan Exchange Traded is 1.1 times less risky than Xtrackers FTSE. It trades about 0.22 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,908  in Xtrackers FTSE Developed on November 28, 2024 and sell it today you would earn a total of  110.00  from holding Xtrackers FTSE Developed or generate 3.78% return on investment over 90 days.

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

JP Morgan Exchange Traded  vs.  Xtrackers FTSE Developed

JP Morgan Exchange

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, JP Morgan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers FTSE Developed

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers FTSE Developed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Xtrackers FTSE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JP Morgan and Xtrackers FTSE

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

The idea behind JP Morgan Exchange Traded and Xtrackers FTSE Developed 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.