Correlation Between Jpmorgan Equity and Gmo Equity

Can any of the company-specific risk be diversified away by investing in both Jpmorgan Equity and Gmo 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 Equity and Gmo Equity 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 Gmo Equity Allocation, you can compare the effects of market volatilities on Jpmorgan Equity and Gmo 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 Equity with a short position of Gmo Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jpmorgan Equity and Gmo Equity.

Diversification Opportunities for Jpmorgan Equity and Gmo Equity

0.87

Correlation Coefficient

Jpmorgan Equity  Gmo Equity

Very poor diversification

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

Pair Corralation between Jpmorgan Equity and Gmo Equity

Assuming the 90 days horizon Jpmorgan Equity Income is expected to generate 0.49 times more return on investment than Gmo Equity. However, Jpmorgan Equity Income is 2.03 times less risky than Gmo Equity. It trades about 0.11 of its potential returns per unit of risk. Gmo Equity Allocation is currently generating about -0.01 per unit of risk. If you would invest  2,542  in Jpmorgan Equity Income on September 13, 2024 and sell it today you would earn a total of  116.00  from holding Jpmorgan Equity Income or generate 4.56% return on investment over 90 days.

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

Jpmorgan Equity Income  vs.  Gmo Equity Allocation

Jpmorgan Equity Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Equity Income are ranked lower than 8 (%) 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.

Gmo Equity Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Jpmorgan Equity Income and Gmo Equity Allocation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.