Correlation Between Global X and JPMorgan USD

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

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

Diversification Opportunities for Global X and JPMorgan USD

0.72

Correlation Coefficient

Global X  JPMorgan USD

Poor diversification

The 3 months correlation between Global and JPMorgan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Global X Emerging and JPMorgan USD Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan USD Emerging and Global X 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 Global X Emerging are associated (or correlated) with JPMorgan USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan USD Emerging has no effect on the direction of Global X i.e., Global X and JPMorgan USD go up and down completely randomly.

Pair Corralation between Global X and JPMorgan USD

Given the investment horizon of 90 days Global X Emerging is expected to generate 1.08 times more return on investment than JPMorgan USD. However, Global X is 1.08 times more volatile than JPMorgan USD Emerging. It trades about 0.03 of its potential returns per unit of risk. JPMorgan USD Emerging is currently generating about 0.02 per unit of risk. If you would invest  2,051  in Global X Emerging on January 24, 2024 and sell it today you would earn a total of  177.00  from holding Global X Emerging or generate 8.63% return on investment over 90 days.

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

Global X Emerging  vs.  JPMorgan USD Emerging

Global X Emerging

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Emerging are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Global X is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan USD Emerging

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan USD Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, JPMorgan USD is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and JPMorgan USD

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

The idea behind Global X Emerging and JPMorgan USD Emerging 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.