Correlation Between Large Cap and Jp Morgan

Can any of the company-specific risk be diversified away by investing in both Large Cap and Jp Morgan 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 Large Cap and Jp Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Large Cap Fund and Jp Morgan Smartretirement, you can compare the effects of market volatilities on Large Cap and Jp Morgan 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 Large Cap with a short position of Jp Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Jp Morgan.

Diversification Opportunities for Large Cap and Jp Morgan

0.93

Correlation Coefficient

Large Cap  Jp Morgan

Almost no diversification

The 3 months correlation between Large and JTSQX is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund and Jp Morgan Smartretirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jp Morgan Smartretirement and Large Cap 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 Large Cap Fund are associated (or correlated) with Jp Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jp Morgan Smartretirement has no effect on the direction of Large Cap i.e., Large Cap and Jp Morgan go up and down completely randomly.

Pair Corralation between Large Cap and Jp Morgan

Assuming the 90 days horizon Large Cap Fund is expected to generate 1.02 times more return on investment than Jp Morgan. However, Large Cap is 1.02 times more volatile than Jp Morgan Smartretirement. It trades about 0.01 of its potential returns per unit of risk. Jp Morgan Smartretirement is currently generating about -0.01 per unit of risk. If you would invest  1,449  in Large Cap Fund on December 29, 2024 and sell it today you would earn a total of  5.00  from holding Large Cap Fund or generate 0.35% return on investment over 90 days.

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

Large Cap Fund  vs.  Jp Morgan Smartretirement

Large Cap Fund

Risk-Adjusted Performance

Very Weak

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

Jp Morgan Smartretirement

Risk-Adjusted Performance

Weak

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

Pair Trading with Large Cap and Jp Morgan

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

The idea behind Large Cap Fund and Jp Morgan Smartretirement 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.