Correlation Between Sp 500 and Jpmorgan Equity

Can any of the company-specific risk be diversified away by investing in both Sp 500 and Jpmorgan Equity 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 Sp 500 and Jpmorgan Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp 500 Index and Jpmorgan Equity Premium, you can compare the effects of market volatilities on Sp 500 and Jpmorgan Equity 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 Sp 500 with a short position of Jpmorgan Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Jpmorgan Equity.

Diversification Opportunities for Sp 500 and Jpmorgan Equity

0.68

Correlation Coefficient

Sp 500  Jpmorgan Equity

Poor diversification

The 3 months correlation between USPRX and Jpmorgan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Jpmorgan Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Equity Premium and Sp 500 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 Sp 500 Index are associated (or correlated) with Jpmorgan Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Equity Premium has no effect on the direction of Sp 500 i.e., Sp 500 and Jpmorgan Equity go up and down completely randomly.

Pair Corralation between Sp 500 and Jpmorgan Equity

Assuming the 90 days horizon Sp 500 Index is expected to generate 1.62 times more return on investment than Jpmorgan Equity. However, Sp 500 is 1.62 times more volatile than Jpmorgan Equity Premium. It trades about 0.07 of its potential returns per unit of risk. Jpmorgan Equity Premium is currently generating about 0.08 per unit of risk. If you would invest  6,415  in Sp 500 Index on December 5, 2024 and sell it today you would earn a total of  891.00  from holding Sp 500 Index or generate 13.89% return on investment over 90 days.

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

Sp 500 Index  vs.  Jpmorgan Equity Premium

Sp 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sp 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jpmorgan Equity Premium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jpmorgan Equity Premium has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Jpmorgan Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sp 500 and Jpmorgan Equity

The main advantage of trading using opposite Sp 500 and Jpmorgan Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Jpmorgan Equity 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 Equity will offset losses from the drop in Jpmorgan Equity's long position.

The idea behind Sp 500 Index and Jpmorgan Equity Premium 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.