Correlation Between Vanguard Small and JPMorgan

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

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

Diversification Opportunities for Vanguard Small and JPMorgan

0.78

Correlation Coefficient

Vanguard Small  JPMorgan

Poor diversification

The 3 months correlation between Vanguard and JPMorgan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and JPMorgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan and Vanguard Small 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 Vanguard Small Cap Growth are associated (or correlated) with JPMorgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan has no effect on the direction of Vanguard Small i.e., Vanguard Small and JPMorgan go up and down completely randomly.

Pair Corralation between Vanguard Small and JPMorgan

If you would invest  25,500  in Vanguard Small Cap Growth on September 12, 2024 and sell it today you would earn a total of  4,045  from holding Vanguard Small Cap Growth or generate 15.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Vanguard Small Cap Growth  vs.  JPMorgan

Vanguard Small Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental drivers, Vanguard Small disclosed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, JPMorgan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Vanguard Small and JPMorgan

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

The idea behind Vanguard Small Cap Growth and JPMorgan 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.