Correlation Between Federated Government and Jpmorgan High

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

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

Diversification Opportunities for Federated Government and Jpmorgan High

0.29

Correlation Coefficient

Federated Government  Jpmorgan High

Modest diversification

The 3 months correlation between Federated and Jpmorgan is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Income and Jpmorgan High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan High Yield and Federated Government 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 Federated Government Income are associated (or correlated) with Jpmorgan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan High Yield has no effect on the direction of Federated Government i.e., Federated Government and Jpmorgan High go up and down completely randomly.

Pair Corralation between Federated Government and Jpmorgan High

Assuming the 90 days horizon Federated Government is expected to generate 14.05 times less return on investment than Jpmorgan High. In addition to that, Federated Government is 2.01 times more volatile than Jpmorgan High Yield. It trades about 0.01 of its total potential returns per unit of risk. Jpmorgan High Yield is currently generating about 0.16 per unit of volatility. If you would invest  606.00  in Jpmorgan High Yield on October 7, 2024 and sell it today you would earn a total of  48.00  from holding Jpmorgan High Yield or generate 7.92% return on investment over 90 days.

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

Federated Government Income  vs.  Jpmorgan High Yield

Federated Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jpmorgan High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federated Government and Jpmorgan High

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

The idea behind Federated Government Income and Jpmorgan High Yield 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.