Correlation Between JP Morgan and Democracy International

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

Diversification Opportunities for JP Morgan and Democracy International

0.98

Correlation Coefficient

JP Morgan  Democracy International

Almost no diversification

The 3 months correlation between JIRE and Democracy is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Exchange Traded and Democracy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Democracy International 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 Democracy International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Democracy International has no effect on the direction of JP Morgan i.e., JP Morgan and Democracy International go up and down completely randomly.

Pair Corralation between JP Morgan and Democracy International

Given the investment horizon of 90 days JP Morgan Exchange Traded is expected to generate 1.04 times more return on investment than Democracy International. However, JP Morgan is 1.04 times more volatile than Democracy International. It trades about 0.25 of its potential returns per unit of risk. Democracy International is currently generating about 0.18 per unit of risk. If you would invest  5,807  in JP Morgan Exchange Traded on December 20, 2024 and sell it today you would earn a total of  777.00  from holding JP Morgan Exchange Traded or generate 13.38% return on investment over 90 days.

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

JP Morgan Exchange Traded  vs.  Democracy International

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 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JP Morgan exhibited solid returns over the last few months and may actually be approaching a breakup point.

Democracy International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Democracy International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Democracy International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JP Morgan and Democracy International

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

The idea behind JP Morgan Exchange Traded and Democracy International 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 Anywhere module to track or share privately all of your investments from the convenience of any device.