Correlation Between M Large and Jpmorgan Hedged

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

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

Diversification Opportunities for M Large and Jpmorgan Hedged

0.91

Correlation Coefficient

M Large  Jpmorgan Hedged

Almost no diversification

The 3 months correlation between MTCGX and Jpmorgan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Jpmorgan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Hedged Equity and M Large 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 M Large Cap are associated (or correlated) with Jpmorgan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Hedged Equity has no effect on the direction of M Large i.e., M Large and Jpmorgan Hedged go up and down completely randomly.

Pair Corralation between M Large and Jpmorgan Hedged

Assuming the 90 days horizon M Large Cap is expected to generate 2.54 times more return on investment than Jpmorgan Hedged. However, M Large is 2.54 times more volatile than Jpmorgan Hedged Equity. It trades about 0.17 of its potential returns per unit of risk. Jpmorgan Hedged Equity is currently generating about 0.22 per unit of risk. If you would invest  3,336  in M Large Cap on September 5, 2024 and sell it today you would earn a total of  405.00  from holding M Large Cap or generate 12.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

M Large Cap  vs.  Jpmorgan Hedged Equity

M Large Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jpmorgan Hedged Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Hedged Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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.

Pair Trading with M Large and Jpmorgan Hedged

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

The idea behind M Large Cap and Jpmorgan Hedged Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.