Correlation Between JPMorgan Municipal and First Trust

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

By analyzing existing cross correlation between JPMorgan Municipal and First Trust Managed, you can compare the effects of market volatilities on JPMorgan Municipal and First Trust 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 Municipal with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Municipal and First Trust.

Diversification Opportunities for JPMorgan Municipal and First Trust

0.97

Correlation Coefficient

JPMorgan Municipal  First Trust

Almost no diversification

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

Pair Corralation between JPMorgan Municipal and First Trust

Given the investment horizon of 90 days JPMorgan Municipal is expected to generate 0.88 times more return on investment than First Trust. However, JPMorgan Municipal is 1.13 times less risky than First Trust. It trades about 0.0 of its potential returns per unit of risk. First Trust Managed is currently generating about -0.04 per unit of risk. If you would invest  4,989  in JPMorgan Municipal on December 29, 2024 and sell it today you would earn a total of  0.00  from holding JPMorgan Municipal or generate 0.0% return on investment over 90 days.

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

JPMorgan Municipal  vs.  First Trust Managed

JPMorgan Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JPMorgan Municipal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

First Trust Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Managed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPMorgan Municipal and First Trust

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

The idea behind JPMorgan Municipal and First Trust Managed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.