Correlation Between Invesco FTSE and JPMorgan International

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

By analyzing existing cross correlation between Invesco FTSE RAFI and JPMorgan International Value, you can compare the effects of market volatilities on Invesco FTSE and JPMorgan International 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 Invesco FTSE with a short position of JPMorgan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and JPMorgan International.

Diversification Opportunities for Invesco FTSE and JPMorgan International

1.0

Correlation Coefficient

Invesco FTSE  JPMorgan International

No risk reduction

The 3 months correlation between Invesco and JPMorgan is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and JPMorgan International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan International and Invesco FTSE 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 Invesco FTSE RAFI are associated (or correlated) with JPMorgan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan International has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and JPMorgan International go up and down completely randomly.

Pair Corralation between Invesco FTSE and JPMorgan International

Considering the 90-day investment horizon Invesco FTSE is expected to generate 1.15 times less return on investment than JPMorgan International. But when comparing it to its historical volatility, Invesco FTSE RAFI is 1.02 times less risky than JPMorgan International. It trades about 0.2 of its potential returns per unit of risk. JPMorgan International Value is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,517  in JPMorgan International Value on December 29, 2024 and sell it today you would earn a total of  698.00  from holding JPMorgan International Value or generate 12.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Invesco FTSE RAFI  vs.  JPMorgan International Value

Invesco FTSE RAFI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Invesco FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

JPMorgan International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan International Value are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, JPMorgan International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco FTSE and JPMorgan International

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

The idea behind Invesco FTSE RAFI and JPMorgan International Value 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.