Correlation Between JSE and FNB ETN

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

By analyzing existing cross correlation between JSE Limited and FNB ETN JPMORGQ, you can compare the effects of market volatilities on JSE and FNB ETN 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 JSE with a short position of FNB ETN. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSE and FNB ETN.

Diversification Opportunities for JSE and FNB ETN

-0.46

Correlation Coefficient

JSE  FNB ETN

Very good diversification

The 3 months correlation between JSE and FNB is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding JSE Limited and FNB ETN JPMORGQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB ETN JPMORGQ and JSE 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 JSE Limited are associated (or correlated) with FNB ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB ETN JPMORGQ has no effect on the direction of JSE i.e., JSE and FNB ETN go up and down completely randomly.

Pair Corralation between JSE and FNB ETN

Assuming the 90 days trading horizon JSE Limited is expected to under-perform the FNB ETN. But the stock apears to be less risky and, when comparing its historical volatility, JSE Limited is 1.31 times less risky than FNB ETN. The stock trades about -0.12 of its potential returns per unit of risk. The FNB ETN JPMORGQ is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  250,200  in FNB ETN JPMORGQ on October 6, 2024 and sell it today you would earn a total of  6,300  from holding FNB ETN JPMORGQ or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

JSE Limited  vs.  FNB ETN JPMORGQ

JSE Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

FNB ETN JPMORGQ

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days FNB ETN JPMORGQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, FNB ETN sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSE and FNB ETN

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

The idea behind JSE Limited and FNB ETN JPMORGQ 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..