Correlation Between Nasdaq and Jpmorgan Hedged

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

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

Diversification Opportunities for Nasdaq and Jpmorgan Hedged

0.87

Correlation Coefficient

Nasdaq  Jpmorgan Hedged

Very poor diversification

The 3 months correlation between Nasdaq and Jpmorgan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Jpmorgan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Hedged Equity and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Jpmorgan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Hedged Equity has no effect on the direction of Nasdaq i.e., Nasdaq and Jpmorgan Hedged go up and down completely randomly.

Pair Corralation between Nasdaq and Jpmorgan Hedged

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 2.57 times more return on investment than Jpmorgan Hedged. However, Nasdaq is 2.57 times more volatile than Jpmorgan Hedged Equity. It trades about 0.14 of its potential returns per unit of risk. Jpmorgan Hedged Equity is currently generating about 0.13 per unit of risk. If you would invest  5,946  in Nasdaq Inc on September 24, 2024 and sell it today you would earn a total of  1,824  from holding Nasdaq Inc or generate 30.68% return on investment over 90 days.

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

Nasdaq Inc  vs.  Jpmorgan Hedged Equity

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Jpmorgan Hedged Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Hedged Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jpmorgan Hedged is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Jpmorgan Hedged

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

The idea behind Nasdaq Inc and Jpmorgan Hedged 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.