Correlation Between Small Cap and Jpmorgan Mid

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

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

Diversification Opportunities for Small Cap and Jpmorgan Mid

0.93

Correlation Coefficient

Small Cap  Jpmorgan Mid

Almost no diversification

The 3 months correlation between Small and Jpmorgan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Jpmorgan Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Mid Cap and Small Cap 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 Small Cap Stock are associated (or correlated) with Jpmorgan Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Mid Cap has no effect on the direction of Small Cap i.e., Small Cap and Jpmorgan Mid go up and down completely randomly.

Pair Corralation between Small Cap and Jpmorgan Mid

Assuming the 90 days horizon Small Cap Stock is expected to generate 0.76 times more return on investment than Jpmorgan Mid. However, Small Cap Stock is 1.32 times less risky than Jpmorgan Mid. It trades about -0.22 of its potential returns per unit of risk. Jpmorgan Mid Cap is currently generating about -0.17 per unit of risk. If you would invest  1,506  in Small Cap Stock on December 3, 2024 and sell it today you would lose (226.00) from holding Small Cap Stock or give up 15.01% of portfolio value over 90 days.

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

Small Cap Stock  vs.  Jpmorgan Mid Cap

Small Cap Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Stock 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Jpmorgan Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jpmorgan Mid Cap 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Small Cap and Jpmorgan Mid

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

The idea behind Small Cap Stock and Jpmorgan Mid 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.