Correlation Between JPMorgan Fundamental and Vanguard Small

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

By analyzing existing cross correlation between JPMorgan Fundamental Data and Vanguard Small Cap Index, you can compare the effects of market volatilities on JPMorgan Fundamental and Vanguard Small 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 Fundamental with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Fundamental and Vanguard Small.

Diversification Opportunities for JPMorgan Fundamental and Vanguard Small

0.87

Correlation Coefficient

JPMorgan Fundamental  Vanguard Small

Very poor diversification

The 3 months correlation between JPMorgan and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Fundamental Data and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and JPMorgan Fundamental 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 Fundamental Data are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of JPMorgan Fundamental i.e., JPMorgan Fundamental and Vanguard Small go up and down completely randomly.

Pair Corralation between JPMorgan Fundamental and Vanguard Small

Given the investment horizon of 90 days JPMorgan Fundamental Data is expected to generate 0.71 times more return on investment than Vanguard Small. However, JPMorgan Fundamental Data is 1.41 times less risky than Vanguard Small. It trades about 0.17 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.05 per unit of risk. If you would invest  4,992  in JPMorgan Fundamental Data on October 24, 2024 and sell it today you would earn a total of  817.50  from holding JPMorgan Fundamental Data or generate 16.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	23.28%
Values	Daily Returns

JPMorgan Fundamental Data  vs.  Vanguard Small Cap Index

JPMorgan Fundamental Data

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Fundamental Data are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, JPMorgan Fundamental is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JPMorgan Fundamental and Vanguard Small

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

The idea behind JPMorgan Fundamental Data and Vanguard Small Cap Index 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.