Correlation Between Wells Fargo and Jpmorgan Small

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

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

Diversification Opportunities for Wells Fargo and Jpmorgan Small

0.95

Correlation Coefficient

Wells Fargo  Jpmorgan Small

Almost no diversification

The 3 months correlation between Wells and Jpmorgan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Growth and Jpmorgan Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Small Cap and Wells Fargo 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 Wells Fargo Growth are associated (or correlated) with Jpmorgan Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Small Cap has no effect on the direction of Wells Fargo i.e., Wells Fargo and Jpmorgan Small go up and down completely randomly.

Pair Corralation between Wells Fargo and Jpmorgan Small

Assuming the 90 days horizon Wells Fargo Growth is expected to under-perform the Jpmorgan Small. In addition to that, Wells Fargo is 1.82 times more volatile than Jpmorgan Small Cap. It trades about -0.11 of its total potential returns per unit of risk. Jpmorgan Small Cap is currently generating about -0.12 per unit of volatility. If you would invest  6,027  in Jpmorgan Small Cap on October 15, 2024 and sell it today you would lose (680.00) from holding Jpmorgan Small Cap or give up 11.28% of portfolio value over 90 days.

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

Wells Fargo Growth  vs.  Jpmorgan Small Cap

Wells Fargo Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking signals remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Jpmorgan Small Cap

Risk-Adjusted Performance

0 of 100

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 forward 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 Wells Fargo and Jpmorgan Small

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

The idea behind Wells Fargo Growth and Jpmorgan 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.