Correlation Between Swan Defined and Jpmorgan Hedged

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

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

Diversification Opportunities for Swan Defined and Jpmorgan Hedged

0.85

Correlation Coefficient

Swan Defined  Jpmorgan Hedged

Very poor diversification

The 3 months correlation between Swan and Jpmorgan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk 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 Swan Defined 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 Swan Defined Risk 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 Swan Defined i.e., Swan Defined and Jpmorgan Hedged go up and down completely randomly.

Pair Corralation between Swan Defined and Jpmorgan Hedged

Assuming the 90 days horizon Swan Defined is expected to generate 2.88 times less return on investment than Jpmorgan Hedged. In addition to that, Swan Defined is 1.59 times more volatile than Jpmorgan Hedged Equity. It trades about 0.03 of its total potential returns per unit of risk. Jpmorgan Hedged Equity is currently generating about 0.12 per unit of volatility. If you would invest  2,465  in Jpmorgan Hedged Equity on October 5, 2024 and sell it today you would earn a total of  847.00  from holding Jpmorgan Hedged Equity or generate 34.36% return on investment over 90 days.

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

Swan Defined Risk  vs.  Jpmorgan Hedged Equity

Swan Defined Risk

Risk-Adjusted Performance

2 of 100

Weak

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

Jpmorgan Hedged Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Hedged Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Swan Defined and Jpmorgan Hedged

The main advantage of trading using opposite Swan Defined and Jpmorgan Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swan Defined 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 Swan Defined Risk 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.