Correlation Between Morningstar Defensive and Jpmorgan High

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

By analyzing existing cross correlation between Morningstar Defensive Bond and Jpmorgan High Yield, you can compare the effects of market volatilities on Morningstar Defensive and Jpmorgan High 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 Morningstar Defensive with a short position of Jpmorgan High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Jpmorgan High.

Diversification Opportunities for Morningstar Defensive and Jpmorgan High

0.32

Correlation Coefficient

Morningstar Defensive  Jpmorgan High

Weak diversification

The 3 months correlation between Morningstar and Jpmorgan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Jpmorgan High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan High Yield and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Jpmorgan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan High Yield has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Jpmorgan High go up and down completely randomly.

Pair Corralation between Morningstar Defensive and Jpmorgan High

Assuming the 90 days horizon Morningstar Defensive is expected to generate 1.55 times less return on investment than Jpmorgan High. But when comparing it to its historical volatility, Morningstar Defensive Bond is 1.67 times less risky than Jpmorgan High. It trades about 0.12 of its potential returns per unit of risk. Jpmorgan High Yield is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  563.00  in Jpmorgan High Yield on October 4, 2024 and sell it today you would earn a total of  88.00  from holding Jpmorgan High Yield or generate 15.63% return on investment over 90 days.

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

Morningstar Defensive Bond  vs.  Jpmorgan High Yield

Morningstar Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jpmorgan High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Morningstar Defensive and Jpmorgan High

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

The idea behind Morningstar Defensive Bond and Jpmorgan High Yield 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..