Correlation Between Sarofim Equity and Jpmorgan Large

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

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

Diversification Opportunities for Sarofim Equity and Jpmorgan Large

0.76

Correlation Coefficient

Sarofim Equity  Jpmorgan Large

Poor diversification

The 3 months correlation between Sarofim and Jpmorgan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Jpmorgan Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Large Cap and Sarofim 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 Sarofim Equity are associated (or correlated) with Jpmorgan Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Large Cap has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Jpmorgan Large go up and down completely randomly.

Pair Corralation between Sarofim Equity and Jpmorgan Large

Assuming the 90 days horizon Sarofim Equity is expected to generate 2.42 times less return on investment than Jpmorgan Large. But when comparing it to its historical volatility, Sarofim Equity is 1.42 times less risky than Jpmorgan Large. It trades about 0.12 of its potential returns per unit of risk. Jpmorgan Large Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,599  in Jpmorgan Large Cap on September 5, 2024 and sell it today you would earn a total of  605.00  from holding Jpmorgan Large Cap or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Sarofim Equity  vs.  Jpmorgan Large Cap

Sarofim Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sarofim Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Sarofim Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jpmorgan Large Cap

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Jpmorgan Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak fundamental indicators, Jpmorgan Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarofim Equity and Jpmorgan Large

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

The idea behind Sarofim Equity and Jpmorgan Large 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.