Correlation Between American Funds and Jpmorgan Equity

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

Diversification Opportunities for American Funds and Jpmorgan Equity

0.94

Correlation Coefficient

American Funds  Jpmorgan Equity

Almost no diversification

The 3 months correlation between American and Jpmorgan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American 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 Funds 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 Funds American 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 Funds i.e., American Funds and Jpmorgan Equity go up and down completely randomly.

Pair Corralation between American Funds and Jpmorgan Equity

Assuming the 90 days horizon American Funds is expected to generate 2.05 times less return on investment than Jpmorgan Equity. But when comparing it to its historical volatility, American Funds American is 1.21 times less risky than Jpmorgan Equity. It trades about 0.14 of its potential returns per unit of risk. Jpmorgan Equity Income is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,351  in Jpmorgan Equity Income on October 22, 2024 and sell it today you would earn a total of  73.00  from holding Jpmorgan Equity Income or generate 3.11% return on investment over 90 days.

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

American Funds American  vs.  Jpmorgan Equity Income

American Funds American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds American has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jpmorgan Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Jpmorgan Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Funds and Jpmorgan Equity

The main advantage of trading using opposite American Funds and Jpmorgan Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 Funds American 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.