Correlation Between Invesco SP and JP Morgan

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

By analyzing existing cross correlation between Invesco SP MidCap and JP Morgan Exchange Traded, you can compare the effects of market volatilities on Invesco SP and JP Morgan 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 SP with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and JP Morgan.

Diversification Opportunities for Invesco SP and JP Morgan

-0.28

Correlation Coefficient

Invesco SP  JP Morgan

Very good diversification

The 3 months correlation between Invesco and JIRE is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and Invesco SP 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 SP MidCap are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of Invesco SP i.e., Invesco SP and JP Morgan go up and down completely randomly.

Pair Corralation between Invesco SP and JP Morgan

Given the investment horizon of 90 days Invesco SP MidCap is expected to under-perform the JP Morgan. In addition to that, Invesco SP is 1.3 times more volatile than JP Morgan Exchange Traded. It trades about -0.03 of its total potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.19 per unit of volatility. If you would invest  5,846  in JP Morgan Exchange Traded on December 28, 2024 and sell it today you would earn a total of  594.00  from holding JP Morgan Exchange Traded or generate 10.16% return on investment over 90 days.

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

Invesco SP MidCap  vs.  JP Morgan Exchange Traded

Invesco SP MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Invesco SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JP Morgan Exchange

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JP Morgan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco SP and JP Morgan

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

The idea behind Invesco SP MidCap and JP Morgan Exchange Traded 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.