Correlation Between Jpmorgan Small and Sarofim Equity

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

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

Diversification Opportunities for Jpmorgan Small and Sarofim Equity

0.86

Correlation Coefficient

Jpmorgan Small  Sarofim Equity

Very poor diversification

The 3 months correlation between JPMORGAN and Sarofim is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Small Cap and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity and Jpmorgan Small 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 Small Cap are associated (or correlated) with Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Jpmorgan Small i.e., Jpmorgan Small and Sarofim Equity go up and down completely randomly.

Pair Corralation between Jpmorgan Small and Sarofim Equity

Assuming the 90 days horizon Jpmorgan Small Cap is expected to under-perform the Sarofim Equity. In addition to that, Jpmorgan Small is 1.54 times more volatile than Sarofim Equity. It trades about -0.11 of its total potential returns per unit of risk. Sarofim Equity is currently generating about -0.07 per unit of volatility. If you would invest  1,415  in Sarofim Equity on December 30, 2024 and sell it today you would lose (59.00) from holding Sarofim Equity or give up 4.17% of portfolio value over 90 days.

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

Jpmorgan Small Cap  vs.  Sarofim Equity

Jpmorgan Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jpmorgan Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sarofim Equity

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jpmorgan Small and Sarofim Equity

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

The idea behind Jpmorgan Small Cap and Sarofim 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.