Correlation Between JPM Emerging and JPM Europe

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

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

Diversification Opportunities for JPM Emerging and JPM Europe

0.0

Correlation Coefficient

JPM Emerging  JPM Europe

Pay attention - limited upside

The 3 months correlation between JPM and JPM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding JPM Emerging Markets and JPM Europe Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM Europe Equity and JPM Emerging 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 Emerging Markets are associated (or correlated) with JPM Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM Europe Equity has no effect on the direction of JPM Emerging i.e., JPM Emerging and JPM Europe go up and down completely randomly.

Pair Corralation between JPM Emerging and JPM Europe

If you would invest (100.00) in JPM Europe Equity on October 12, 2024 and sell it today you would earn a total of  100.00  from holding JPM Europe Equity or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

JPM Emerging Markets  vs.  JPM Europe Equity

JPM Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, JPM Emerging is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JPM Europe Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM Europe Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, JPM Europe is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPM Emerging and JPM Europe

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

The idea behind JPM Emerging Markets and JPM Europe Equity 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.