Correlation Between Schwab Fundamental and JPMorgan Fundamental

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

By analyzing existing cross correlation between Schwab Fundamental Broad and JPMorgan Fundamental Data, you can compare the effects of market volatilities on Schwab Fundamental and JPMorgan Fundamental 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 Schwab Fundamental with a short position of JPMorgan Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and JPMorgan Fundamental.

Diversification Opportunities for Schwab Fundamental and JPMorgan Fundamental

0.71

Correlation Coefficient

Schwab Fundamental  JPMorgan Fundamental

Poor diversification

The 3 months correlation between Schwab and JPMorgan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Broad and JPMorgan Fundamental Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Fundamental Data and Schwab Fundamental 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 Schwab Fundamental Broad are associated (or correlated) with JPMorgan Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Fundamental Data has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and JPMorgan Fundamental go up and down completely randomly.

Pair Corralation between Schwab Fundamental and JPMorgan Fundamental

Given the investment horizon of 90 days Schwab Fundamental Broad is expected to generate 0.78 times more return on investment than JPMorgan Fundamental. However, Schwab Fundamental Broad is 1.28 times less risky than JPMorgan Fundamental. It trades about -0.01 of its potential returns per unit of risk. JPMorgan Fundamental Data is currently generating about -0.08 per unit of risk. If you would invest  2,331  in Schwab Fundamental Broad on December 20, 2024 and sell it today you would lose (11.00) from holding Schwab Fundamental Broad or give up 0.47% of portfolio value over 90 days.

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

Schwab Fundamental Broad  vs.  JPMorgan Fundamental Data

Schwab Fundamental Broad

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Fundamental Broad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JPMorgan Fundamental Data

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Fundamental Data has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, JPMorgan Fundamental is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Schwab Fundamental and JPMorgan Fundamental

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

The idea behind Schwab Fundamental Broad and JPMorgan Fundamental Data 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.