Correlation Between NYSE Composite and Jpmorgan California

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

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

Diversification Opportunities for NYSE Composite and Jpmorgan California

0.6

Correlation Coefficient

NYSE Composite  Jpmorgan California

Poor diversification

The 3 months correlation between NYSE and Jpmorgan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Jpmorgan California Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan California Tax and NYSE Composite 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 NYSE Composite are associated (or correlated) with Jpmorgan California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan California Tax has no effect on the direction of NYSE Composite i.e., NYSE Composite and Jpmorgan California go up and down completely randomly.

Pair Corralation between NYSE Composite and Jpmorgan California

Assuming the 90 days trading horizon NYSE Composite is expected to generate 4.23 times more return on investment than Jpmorgan California. However, NYSE Composite is 4.23 times more volatile than Jpmorgan California Tax. It trades about 0.09 of its potential returns per unit of risk. Jpmorgan California Tax is currently generating about 0.07 per unit of risk. If you would invest  1,476,437  in NYSE Composite on December 2, 2024 and sell it today you would earn a total of  526,382  from holding NYSE Composite or generate 35.65% return on investment over 90 days.

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

NYSE Composite  vs.  Jpmorgan California Tax

Pair Trading with NYSE Composite and Jpmorgan California

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

The idea behind NYSE Composite and Jpmorgan California Tax 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.