Correlation Between Jpmorgan Hedged and Vanguard California

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

By analyzing existing cross correlation between Jpmorgan Hedged Equity and Vanguard California Long Term, you can compare the effects of market volatilities on Jpmorgan Hedged and Vanguard California 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 Hedged with a short position of Vanguard California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jpmorgan Hedged and Vanguard California.

Diversification Opportunities for Jpmorgan Hedged and Vanguard California

0.04

Correlation Coefficient

Jpmorgan Hedged  Vanguard California

Significant diversification

The 3 months correlation between Jpmorgan and VANGUARD is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Hedged Equity and Vanguard California Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard California and Jpmorgan Hedged 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 Hedged Equity are associated (or correlated) with Vanguard California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard California has no effect on the direction of Jpmorgan Hedged i.e., Jpmorgan Hedged and Vanguard California go up and down completely randomly.

Pair Corralation between Jpmorgan Hedged and Vanguard California

Assuming the 90 days horizon Jpmorgan Hedged Equity is expected to under-perform the Vanguard California. In addition to that, Jpmorgan Hedged is 2.82 times more volatile than Vanguard California Long Term. It trades about -0.09 of its total potential returns per unit of risk. Vanguard California Long Term is currently generating about -0.06 per unit of volatility. If you would invest  1,134  in Vanguard California Long Term on December 30, 2024 and sell it today you would lose (10.00) from holding Vanguard California Long Term or give up 0.88% of portfolio value over 90 days.

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

Jpmorgan Hedged Equity  vs.  Vanguard California Long Term

Jpmorgan Hedged Equity

Risk-Adjusted Performance

Very Weak

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

Vanguard California

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard California Long Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard California 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 Hedged and Vanguard California

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

The idea behind Jpmorgan Hedged Equity and Vanguard California Long Term 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.