Correlation Between Jpmorgan Equity and Small Cap

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

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

Diversification Opportunities for Jpmorgan Equity and Small Cap

0.44

Correlation Coefficient

Jpmorgan Equity  Small Cap

Very weak diversification

The 3 months correlation between Jpmorgan and Small is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Equity Income and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Jpmorgan Equity 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 Equity Income are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Jpmorgan Equity i.e., Jpmorgan Equity and Small Cap go up and down completely randomly.

Pair Corralation between Jpmorgan Equity and Small Cap

Assuming the 90 days horizon Jpmorgan Equity Income is expected to generate 0.71 times more return on investment than Small Cap. However, Jpmorgan Equity Income is 1.41 times less risky than Small Cap. It trades about 0.04 of its potential returns per unit of risk. Small Cap Equity is currently generating about -0.09 per unit of risk. If you would invest  2,327  in Jpmorgan Equity Income on December 30, 2024 and sell it today you would earn a total of  36.00  from holding Jpmorgan Equity Income or generate 1.55% return on investment over 90 days.

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

Jpmorgan Equity Income  vs.  Small Cap Equity

Jpmorgan Equity Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Equity Income are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jpmorgan Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small Cap 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 Equity and Small Cap

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

The idea behind Jpmorgan Equity Income and Small Cap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.