Correlation Between Cap ISR and JPM America

Can any of the company-specific risk be diversified away by investing in both Cap 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 Cap 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 Cap ISR Actions and JPM America Equity, you can compare the effects of market volatilities on Cap 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 Cap ISR with a short position of JPM America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cap ISR and JPM America.

Diversification Opportunities for Cap ISR and JPM America

-0.65

Correlation Coefficient

Cap ISR  JPM America

Excellent diversification

The 3 months correlation between Cap and JPM is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cap ISR Actions 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 Cap 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 Cap ISR Actions 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 Cap ISR i.e., Cap ISR and JPM America go up and down completely randomly.

Pair Corralation between Cap ISR and JPM America

Assuming the 90 days trading horizon Cap ISR is expected to generate 10.48 times less return on investment than JPM America. But when comparing it to its historical volatility, Cap ISR Actions is 1.39 times less risky than JPM America. It trades about 0.01 of its potential returns per unit of risk. JPM America Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  36,013  in JPM America Equity on October 4, 2024 and sell it today you would earn a total of  7,597  from holding JPM America Equity or generate 21.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	43.91%
Values	Daily Returns

Cap ISR Actions  vs.  JPM America Equity

Cap ISR Actions

Risk-Adjusted Performance

0 of 100

Very Weak

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

JPM America Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, JPM America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cap ISR and JPM America

The main advantage of trading using opposite Cap ISR and JPM America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cap 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 Cap ISR Actions 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.