Correlation Between JPMorgan USD and Franklin Liberty

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

By analyzing existing cross correlation between JPMorgan USD Emerging and Franklin Liberty Senior, you can compare the effects of market volatilities on JPMorgan USD and Franklin Liberty 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 USD with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan USD and Franklin Liberty.

Diversification Opportunities for JPMorgan USD and Franklin Liberty

-0.01

Correlation Coefficient

JPMorgan USD  Franklin Liberty

Good diversification

The 3 months correlation between JPMorgan and Franklin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan USD Emerging and Franklin Liberty Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Senior and JPMorgan USD 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 USD Emerging are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Senior has no effect on the direction of JPMorgan USD i.e., JPMorgan USD and Franklin Liberty go up and down completely randomly.

Pair Corralation between JPMorgan USD and Franklin Liberty

Given the investment horizon of 90 days JPMorgan USD Emerging is expected to generate 2.57 times more return on investment than Franklin Liberty. However, JPMorgan USD is 2.57 times more volatile than Franklin Liberty Senior. It trades about 0.22 of its potential returns per unit of risk. Franklin Liberty Senior is currently generating about -0.15 per unit of risk. If you would invest  3,817  in JPMorgan USD Emerging on December 3, 2024 and sell it today you would earn a total of  63.00  from holding JPMorgan USD Emerging or generate 1.65% return on investment over 90 days.

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

JPMorgan USD Emerging  vs.  Franklin Liberty Senior

JPMorgan USD Emerging

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan USD Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, JPMorgan USD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Franklin Liberty Senior

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Senior are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Franklin Liberty is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with JPMorgan USD and Franklin Liberty

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

The idea behind JPMorgan USD Emerging and Franklin Liberty Senior 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.