Correlation Between Vanguard and JPMorgan Diversified

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

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

Diversification Opportunities for Vanguard and JPMorgan Diversified

0.98

Correlation Coefficient

Vanguard  JPMorgan Diversified

Almost no diversification

The 3 months correlation between Vanguard and JPMorgan is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified and Vanguard 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 SP Small Cap are associated (or correlated) with JPMorgan Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Diversified has no effect on the direction of Vanguard i.e., Vanguard and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between Vanguard and JPMorgan Diversified

Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.1 times more return on investment than JPMorgan Diversified. However, Vanguard is 1.1 times more volatile than JPMorgan Diversified Return. It trades about -0.14 of its potential returns per unit of risk. JPMorgan Diversified Return is currently generating about -0.2 per unit of risk. If you would invest  11,046  in Vanguard SP Small Cap on November 20, 2024 and sell it today you would lose (265.00) from holding Vanguard SP Small Cap or give up 2.4% of portfolio value over 90 days.

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

Vanguard SP Small Cap  vs.  JPMorgan Diversified Return

Vanguard SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

JPMorgan Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Diversified Return has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, JPMorgan Diversified is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard and JPMorgan Diversified

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

The idea behind Vanguard SP Small Cap and JPMorgan Diversified Return 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.