Correlation Between American Beacon and Jpmorgan Equity

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

By analyzing existing cross correlation between American Beacon Ark and Jpmorgan Equity Income, you can compare the effects of market volatilities on American Beacon and Jpmorgan Equity 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 American Beacon with a short position of Jpmorgan Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Jpmorgan Equity.

Diversification Opportunities for American Beacon and Jpmorgan Equity

0.89

Correlation Coefficient

American Beacon  Jpmorgan Equity

Very poor diversification

The 3 months correlation between American and JPMORGAN is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Ark and Jpmorgan Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Equity Income and American Beacon 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 American Beacon Ark are associated (or correlated) with Jpmorgan Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Equity Income has no effect on the direction of American Beacon i.e., American Beacon and Jpmorgan Equity go up and down completely randomly.

Pair Corralation between American Beacon and Jpmorgan Equity

Assuming the 90 days horizon American Beacon Ark is expected to generate 3.27 times more return on investment than Jpmorgan Equity. However, American Beacon is 3.27 times more volatile than Jpmorgan Equity Income. It trades about 0.24 of its potential returns per unit of risk. Jpmorgan Equity Income is currently generating about 0.19 per unit of risk. If you would invest  1,148  in American Beacon Ark on September 4, 2024 and sell it today you would earn a total of  439.00  from holding American Beacon Ark or generate 38.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

American Beacon Ark  vs.  Jpmorgan Equity Income

American Beacon Ark

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ark are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Beacon showed solid returns over the last few months and may actually be approaching a breakup point.

Jpmorgan Equity Income

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Equity Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Jpmorgan Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Beacon and Jpmorgan Equity

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

The idea behind American Beacon Ark and Jpmorgan Equity Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.