Correlation Between Vanguard Russell and JPMorgan Market

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

By analyzing existing cross correlation between Vanguard Russell 2000 and JPMorgan Market Expansion, you can compare the effects of market volatilities on Vanguard Russell and JPMorgan Market 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 Russell with a short position of JPMorgan Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and JPMorgan Market.

Diversification Opportunities for Vanguard Russell and JPMorgan Market

0.99

Correlation Coefficient

Vanguard Russell  JPMorgan Market

No risk reduction

The 3 months correlation between Vanguard and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and JPMorgan Market Expansion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Market Expansion and Vanguard Russell 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 Russell 2000 are associated (or correlated) with JPMorgan Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Market Expansion has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and JPMorgan Market go up and down completely randomly.

Pair Corralation between Vanguard Russell and JPMorgan Market

Assuming the 90 days horizon Vanguard Russell 2000 is expected to generate 1.26 times more return on investment than JPMorgan Market. However, Vanguard Russell is 1.26 times more volatile than JPMorgan Market Expansion. It trades about 0.17 of its potential returns per unit of risk. JPMorgan Market Expansion is currently generating about 0.19 per unit of risk. If you would invest  32,912  in Vanguard Russell 2000 on September 2, 2024 and sell it today you would earn a total of  4,491  from holding Vanguard Russell 2000 or generate 13.65% return on investment over 90 days.

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

Vanguard Russell 2000  vs.  JPMorgan Market Expansion

Vanguard Russell 2000

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Vanguard Russell showed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Market Expansion

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Market Expansion are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, JPMorgan Market may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Russell and JPMorgan Market

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

The idea behind Vanguard Russell 2000 and JPMorgan Market Expansion 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.