Correlation Between JPM America and JPMF Global

Can any of the company-specific risk be diversified away by investing in both JPM America and JPMF Global 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 JPM America and JPMF Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JPM America Equity and JPMF Global Natural, you can compare the effects of market volatilities on JPM America and JPMF Global 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 JPM America with a short position of JPMF Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM America and JPMF Global.

Diversification Opportunities for JPM America and JPMF Global

0.54

Correlation Coefficient

JPM America  JPMF Global

Very weak diversification

The 3 months correlation between JPM and JPMF is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding JPM America Equity and JPMF Global Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMF Global Natural and JPM America 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 JPM America Equity are associated (or correlated) with JPMF Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMF Global Natural has no effect on the direction of JPM America i.e., JPM America and JPMF Global go up and down completely randomly.

Pair Corralation between JPM America and JPMF Global

Assuming the 90 days trading horizon JPM America Equity is expected to under-perform the JPMF Global. But the fund apears to be less risky and, when comparing its historical volatility, JPM America Equity is 1.02 times less risky than JPMF Global. The fund trades about -0.14 of its potential returns per unit of risk. The JPMF Global Natural is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,220  in JPMF Global Natural on December 20, 2024 and sell it today you would earn a total of  96.00  from holding JPMF Global Natural or generate 7.87% return on investment over 90 days.

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

JPM America Equity  vs.  JPMF Global Natural

JPM America Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPM America Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unsteady performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

JPMF Global Natural

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMF Global Natural are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, JPMF Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JPM America and JPMF Global

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

The idea behind JPM America Equity and JPMF Global Natural 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..