Correlation Between JPMorgan Equity and Pacer Cash

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

By analyzing existing cross correlation between JPMorgan Equity Premium and Pacer Cash Cows, you can compare the effects of market volatilities on JPMorgan Equity and Pacer Cash 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 JPMorgan Equity with a short position of Pacer Cash. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Equity and Pacer Cash.

Diversification Opportunities for JPMorgan Equity and Pacer Cash

0.96

Correlation Coefficient

JPMorgan Equity  Pacer Cash

Almost no diversification

The 3 months correlation between JPMorgan and Pacer is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and Pacer Cash Cows in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Cash Cows and JPMorgan Equity 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 JPMorgan Equity Premium are associated (or correlated) with Pacer Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Cash Cows has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and Pacer Cash go up and down completely randomly.

Pair Corralation between JPMorgan Equity and Pacer Cash

Given the investment horizon of 90 days JPMorgan Equity is expected to generate 1.31 times less return on investment than Pacer Cash. But when comparing it to its historical volatility, JPMorgan Equity Premium is 2.08 times less risky than Pacer Cash. It trades about 0.12 of its potential returns per unit of risk. Pacer Cash Cows is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,683  in Pacer Cash Cows on September 17, 2024 and sell it today you would earn a total of  206.00  from holding Pacer Cash Cows or generate 3.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

JPMorgan Equity Premium  vs.  Pacer Cash Cows

JPMorgan Equity Premium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pacer Cash Cows

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Cash Cows are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Pacer Cash is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPMorgan Equity and Pacer Cash

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

The idea behind JPMorgan Equity Premium and Pacer Cash Cows 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.