Correlation Between JPM America and Naranja Renta

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

By analyzing existing cross correlation between JPM America Equity and Naranja Renta Fija, you can compare the effects of market volatilities on JPM America and Naranja Renta 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 JPM America with a short position of Naranja Renta. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM America and Naranja Renta.

Diversification Opportunities for JPM America and Naranja Renta

0.75

Correlation Coefficient

JPM America  Naranja Renta

Poor diversification

The 3 months correlation between JPM and Naranja is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding JPM America Equity and Naranja Renta Fija in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naranja Renta Fija and JPM America 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 JPM America Equity are associated (or correlated) with Naranja Renta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naranja Renta Fija has no effect on the direction of JPM America i.e., JPM America and Naranja Renta go up and down completely randomly.

Pair Corralation between JPM America and Naranja Renta

Assuming the 90 days trading horizon JPM America Equity is expected to generate 12.76 times more return on investment than Naranja Renta. However, JPM America is 12.76 times more volatile than Naranja Renta Fija. It trades about 0.1 of its potential returns per unit of risk. Naranja Renta Fija is currently generating about 0.18 per unit of risk. If you would invest  36,013  in JPM America Equity on October 21, 2024 and sell it today you would earn a total of  8,565  from holding JPM America Equity or generate 23.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	47.15%
Values	Daily Returns

JPM America Equity  vs.  Naranja Renta Fija

JPM America Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, JPM America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Naranja Renta Fija

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Naranja Renta Fija are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Naranja Renta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPM America and Naranja Renta

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

The idea behind JPM America Equity and Naranja Renta Fija 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.