Correlation Between Impact ISR and JPM America

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

By analyzing existing cross correlation between Impact ISR Performance and JPM America Equity, you can compare the effects of market volatilities on Impact ISR and JPM America 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 Impact ISR with a short position of JPM America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impact ISR and JPM America.

Diversification Opportunities for Impact ISR and JPM America

-0.25

Correlation Coefficient

Impact ISR  JPM America

Very good diversification

The 3 months correlation between Impact and JPM is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Impact ISR Performance and JPM America Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM America Equity and Impact ISR 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 Impact ISR Performance are associated (or correlated) with JPM America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM America Equity has no effect on the direction of Impact ISR i.e., Impact ISR and JPM America go up and down completely randomly.

Pair Corralation between Impact ISR and JPM America

Assuming the 90 days trading horizon Impact ISR Performance is expected to generate 0.75 times more return on investment than JPM America. However, Impact ISR Performance is 1.33 times less risky than JPM America. It trades about 0.11 of its potential returns per unit of risk. JPM America Equity is currently generating about -0.12 per unit of risk. If you would invest  5,296  in Impact ISR Performance on December 28, 2024 and sell it today you would earn a total of  266.00  from holding Impact ISR Performance or generate 5.02% return on investment over 90 days.

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

Impact ISR Performance  vs.  JPM America Equity

Impact ISR Performance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impact ISR Performance are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly stable basic indicators, Impact ISR is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JPM America Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPM America Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Impact ISR and JPM America

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

The idea behind Impact ISR Performance and JPM America Equity 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.