Correlation Between IShares Intermediate and JPMorgan

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

By analyzing existing cross correlation between iShares Intermediate GovernmentCredit and JPMorgan, you can compare the effects of market volatilities on IShares Intermediate and JPMorgan 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 IShares Intermediate with a short position of JPMorgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Intermediate and JPMorgan.

Diversification Opportunities for IShares Intermediate and JPMorgan

-0.57

Correlation Coefficient

IShares Intermediate  JPMorgan

Excellent diversification

The 3 months correlation between IShares and JPMorgan is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intermediate Governmen and JPMorgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan and IShares Intermediate 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 iShares Intermediate GovernmentCredit are associated (or correlated) with JPMorgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan has no effect on the direction of IShares Intermediate i.e., IShares Intermediate and JPMorgan go up and down completely randomly.

Pair Corralation between IShares Intermediate and JPMorgan

Considering the 90-day investment horizon IShares Intermediate is expected to generate 1.39 times less return on investment than JPMorgan. In addition to that, IShares Intermediate is 1.33 times more volatile than JPMorgan. It trades about 0.11 of its total potential returns per unit of risk. JPMorgan is currently generating about 0.2 per unit of volatility. If you would invest  4,684  in JPMorgan on September 3, 2024 and sell it today you would earn a total of  143.00  from holding JPMorgan or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.6%
Values	Daily Returns

iShares Intermediate Governmen  vs.  JPMorgan

iShares Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Intermediate GovernmentCredit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Intermediate is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

JPMorgan

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days JPMorgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JPMorgan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Intermediate and JPMorgan

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

The idea behind iShares Intermediate GovernmentCredit and JPMorgan 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.