Correlation Between The Jensen and Jensen Global

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

By analyzing existing cross correlation between The Jensen Portfolio and Jensen Global Quality, you can compare the effects of market volatilities on The Jensen and Jensen Global 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 The Jensen with a short position of Jensen Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Jensen and Jensen Global.

Diversification Opportunities for The Jensen and Jensen Global

0.93

Correlation Coefficient

The Jensen  Jensen Global

Almost no diversification

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

Pair Corralation between The Jensen and Jensen Global

Assuming the 90 days horizon The Jensen Portfolio is expected to under-perform the Jensen Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Jensen Portfolio is 1.07 times less risky than Jensen Global. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Jensen Global Quality is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,723  in Jensen Global Quality on December 26, 2024 and sell it today you would lose (22.00) from holding Jensen Global Quality or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

The Jensen Portfolio  vs.  Jensen Global Quality

Jensen Portfolio

Risk-Adjusted Performance

Very Weak

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

Jensen Global Quality

Risk-Adjusted Performance

Very Weak

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

Pair Trading with The Jensen and Jensen Global

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

The idea behind The Jensen Portfolio and Jensen Global Quality 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.