Correlation Between Alpha Architect and JPMorgan Fundamental

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

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

Diversification Opportunities for Alpha Architect and JPMorgan Fundamental

0.12

Correlation Coefficient

Alpha Architect  JPMorgan Fundamental

Average diversification

The 3 months correlation between Alpha and JPMorgan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect International 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 Alpha Architect 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 Alpha Architect International 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 Alpha Architect i.e., Alpha Architect and JPMorgan Fundamental go up and down completely randomly.

Pair Corralation between Alpha Architect and JPMorgan Fundamental

Given the investment horizon of 90 days Alpha Architect is expected to generate 1.7 times less return on investment than JPMorgan Fundamental. In addition to that, Alpha Architect is 1.05 times more volatile than JPMorgan Fundamental Data. It trades about 0.11 of its total potential returns per unit of risk. JPMorgan Fundamental Data is currently generating about 0.2 per unit of volatility. If you would invest  5,648  in JPMorgan Fundamental Data on October 24, 2024 and sell it today you would earn a total of  161.50  from holding JPMorgan Fundamental Data or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Alpha Architect International  vs.  JPMorgan Fundamental Data

Alpha Architect Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Architect International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alpha Architect is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

JPMorgan Fundamental Data

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Fundamental Data are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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 Alpha Architect and JPMorgan Fundamental

The main advantage of trading using opposite Alpha Architect and JPMorgan Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect 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 Alpha Architect International 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.