Correlation Between JPM P and Apple

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

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

Diversification Opportunities for JPM P and Apple

-0.67

Correlation Coefficient

JPM P  Apple

Excellent diversification

The 3 months correlation between JPM and Apple is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding JPM P J and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and JPM P 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 P J are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of JPM P i.e., JPM P and Apple go up and down completely randomly.

Pair Corralation between JPM P and Apple

Assuming the 90 days trading horizon JPM P J is expected to under-perform the Apple. But the preferred stock apears to be less risky and, when comparing its historical volatility, JPM P J is 1.36 times less risky than Apple. The preferred stock trades about -0.41 of its potential returns per unit of risk. The Apple Inc is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest  22,987  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  2,462  from holding Apple Inc or generate 10.71% return on investment over 90 days.

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

JPM P J  vs.  Apple Inc

JPM P J

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPM P J has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Preferred Stock's forward-looking indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Apple Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JPM P and Apple

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

The idea behind JPM P J and Apple Inc 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.