Correlation Between VanEck High and JP Morgan

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

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

Diversification Opportunities for VanEck High and JP Morgan

0.86

Correlation Coefficient

VanEck High  JP Morgan

Very poor diversification

The 3 months correlation between VanEck and JMHI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding VanEck High Yield and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and VanEck High 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 VanEck High Yield 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 Exchange has no effect on the direction of VanEck High i.e., VanEck High and JP Morgan go up and down completely randomly.

Pair Corralation between VanEck High and JP Morgan

Considering the 90-day investment horizon VanEck High Yield is expected to under-perform the JP Morgan. In addition to that, VanEck High is 1.34 times more volatile than JP Morgan Exchange Traded. It trades about -0.05 of its total potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.05 per unit of volatility. If you would invest  4,994  in JP Morgan Exchange Traded on December 28, 2024 and sell it today you would earn a total of  31.00  from holding JP Morgan Exchange Traded or generate 0.62% return on investment over 90 days.

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

VanEck High Yield  vs.  JP Morgan Exchange Traded

VanEck High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VanEck High is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JP Morgan Exchange

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, JP Morgan is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VanEck High and JP Morgan

The main advantage of trading using opposite VanEck High and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck High 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 VanEck High Yield and JP Morgan Exchange Traded 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.