Correlation Between JPMorgan Diversified and First Trust

Can any of the company-specific risk be diversified away by investing in both JPMorgan Diversified 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 Diversified 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 Diversified Return and First Trust Active, you can compare the effects of market volatilities on JPMorgan Diversified 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 Diversified with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Diversified and First Trust.

Diversification Opportunities for JPMorgan Diversified and First Trust

0.84

Correlation Coefficient

JPMorgan Diversified  First Trust

Very poor diversification

The 3 months correlation between JPMorgan and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Diversified Return and First Trust Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Active and JPMorgan Diversified 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 Diversified Return 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 Active has no effect on the direction of JPMorgan Diversified i.e., JPMorgan Diversified and First Trust go up and down completely randomly.

Pair Corralation between JPMorgan Diversified and First Trust

Given the investment horizon of 90 days JPMorgan Diversified Return is expected to generate 0.81 times more return on investment than First Trust. However, JPMorgan Diversified Return is 1.24 times less risky than First Trust. It trades about 0.01 of its potential returns per unit of risk. First Trust Active is currently generating about -0.06 per unit of risk. If you would invest  11,473  in JPMorgan Diversified Return on December 21, 2024 and sell it today you would earn a total of  46.30  from holding JPMorgan Diversified Return or generate 0.4% return on investment over 90 days.

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

JPMorgan Diversified Return  vs.  First Trust Active

JPMorgan Diversified

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JPMorgan Diversified is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Active

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Active has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JPMorgan Diversified and First Trust

The main advantage of trading using opposite JPMorgan Diversified and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Diversified 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 Diversified Return and First Trust Active 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.