Correlation Between First Trust and JPMorgan USD

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

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

Diversification Opportunities for First Trust and JPMorgan USD

0.38

Correlation Coefficient

First Trust  JPMorgan USD

Weak diversification

The 3 months correlation between First and JPMorgan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq 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 First Trust 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 First Trust Nasdaq 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 First Trust i.e., First Trust and JPMorgan USD go up and down completely randomly.

Pair Corralation between First Trust and JPMorgan USD

Given the investment horizon of 90 days First Trust Nasdaq is expected to generate 2.11 times more return on investment than JPMorgan USD. However, First Trust is 2.11 times more volatile than JPMorgan USD Emerging. It trades about 0.32 of its potential returns per unit of risk. JPMorgan USD Emerging is currently generating about -0.04 per unit of risk. If you would invest  2,834  in First Trust Nasdaq on January 20, 2024 and sell it today you would earn a total of  352.00  from holding First Trust Nasdaq or generate 12.42% return on investment over 90 days.

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

First Trust Nasdaq  vs.  JPMorgan USD Emerging

First Trust Nasdaq

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan USD Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and JPMorgan USD

The main advantage of trading using opposite First Trust and JPMorgan USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Nasdaq 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.