Correlation Between Jpmorgan Equity and Touchstone Small

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

Diversification Opportunities for Jpmorgan Equity and Touchstone Small

0.89

Correlation Coefficient

Jpmorgan Equity  Touchstone Small

Very poor diversification

The 3 months correlation between Jpmorgan and Touchstone is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Equity Income and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap 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 Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Cap has no effect on the direction of Jpmorgan Equity i.e., Jpmorgan Equity and Touchstone Small go up and down completely randomly.

Pair Corralation between Jpmorgan Equity and Touchstone Small

Assuming the 90 days horizon Jpmorgan Equity Income is expected to under-perform the Touchstone Small. In addition to that, Jpmorgan Equity is 1.17 times more volatile than Touchstone Small Cap. It trades about -0.14 of its total potential returns per unit of risk. Touchstone Small Cap is currently generating about -0.14 per unit of volatility. If you would invest  4,154  in Touchstone Small Cap on November 28, 2024 and sell it today you would lose (326.00) from holding Touchstone Small Cap or give up 7.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Jpmorgan Equity Income  vs.  Touchstone Small Cap

Jpmorgan Equity Income

Risk-Adjusted Performance

Very Weak

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

Touchstone Small Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jpmorgan Equity and Touchstone Small

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

The idea behind Jpmorgan Equity Income and Touchstone Small Cap 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.