Correlation Between JPMorgan Fundamental and IShares MSCI

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

By analyzing existing cross correlation between JPMorgan Fundamental Data and iShares MSCI EAFE, you can compare the effects of market volatilities on JPMorgan Fundamental and IShares MSCI 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 Fundamental with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Fundamental and IShares MSCI.

Diversification Opportunities for JPMorgan Fundamental and IShares MSCI

-0.63

Correlation Coefficient

JPMorgan Fundamental  IShares MSCI

Excellent diversification

The 3 months correlation between JPMorgan and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Fundamental Data and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and JPMorgan Fundamental 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 Fundamental Data are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of JPMorgan Fundamental i.e., JPMorgan Fundamental and IShares MSCI go up and down completely randomly.

Pair Corralation between JPMorgan Fundamental and IShares MSCI

Given the investment horizon of 90 days JPMorgan Fundamental Data is expected to generate 1.06 times more return on investment than IShares MSCI. However, JPMorgan Fundamental is 1.06 times more volatile than iShares MSCI EAFE. It trades about 0.4 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.04 per unit of risk. If you would invest  5,549  in JPMorgan Fundamental Data on September 4, 2024 and sell it today you would earn a total of  445.00  from holding JPMorgan Fundamental Data or generate 8.02% return on investment over 90 days.

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

JPMorgan Fundamental Data  vs.  iShares MSCI EAFE

JPMorgan Fundamental Data

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Fundamental Data are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, JPMorgan Fundamental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPMorgan Fundamental and IShares MSCI

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

The idea behind JPMorgan Fundamental Data and iShares MSCI EAFE 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.