Correlation Between JPM Europe and Groupama Entreprises

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

By analyzing existing cross correlation between JPM Europe Small and Groupama Entreprises N, you can compare the effects of market volatilities on JPM Europe and Groupama Entreprises 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 Europe with a short position of Groupama Entreprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM Europe and Groupama Entreprises.

Diversification Opportunities for JPM Europe and Groupama Entreprises

-0.15

Correlation Coefficient

JPM Europe  Groupama Entreprises

Good diversification

The 3 months correlation between JPM and Groupama is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding JPM Europe Small and Groupama Entreprises N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupama Entreprises and JPM Europe 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 Europe Small are associated (or correlated) with Groupama Entreprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupama Entreprises has no effect on the direction of JPM Europe i.e., JPM Europe and Groupama Entreprises go up and down completely randomly.

Pair Corralation between JPM Europe and Groupama Entreprises

Assuming the 90 days trading horizon JPM Europe Small is expected to generate 54.1 times more return on investment than Groupama Entreprises. However, JPM Europe is 54.1 times more volatile than Groupama Entreprises N. It trades about 0.03 of its potential returns per unit of risk. Groupama Entreprises N is currently generating about 0.95 per unit of risk. If you would invest  8,910  in JPM Europe Small on October 8, 2024 and sell it today you would earn a total of  100.00  from holding JPM Europe Small or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

JPM Europe Small  vs.  Groupama Entreprises N

JPM Europe Small

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPM Europe Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, JPM Europe is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Groupama Entreprises

Risk-Adjusted Performance

0 of 100

Market Crasher

Over the last 90 days Groupama Entreprises N has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Groupama Entreprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPM Europe and Groupama Entreprises

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

The idea behind JPM Europe Small and Groupama Entreprises N 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.