Correlation Between Vanguard Small-cap and Jpmorgan Strategic

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

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

Diversification Opportunities for Vanguard Small-cap and Jpmorgan Strategic

-0.62

Correlation Coefficient

Vanguard Small-cap  Jpmorgan Strategic

Excellent diversification

The 3 months correlation between Vanguard and Jpmorgan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Jpmorgan Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Strategic Income and Vanguard 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 Vanguard Small Cap Index are associated (or correlated) with Jpmorgan Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Strategic Income has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Jpmorgan Strategic go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Jpmorgan Strategic

Assuming the 90 days horizon Vanguard Small Cap Index is expected to under-perform the Jpmorgan Strategic. In addition to that, Vanguard Small-cap is 20.76 times more volatile than Jpmorgan Strategic Income. It trades about -0.1 of its total potential returns per unit of risk. Jpmorgan Strategic Income is currently generating about 0.33 per unit of volatility. If you would invest  1,135  in Jpmorgan Strategic Income on December 22, 2024 and sell it today you would earn a total of  12.00  from holding Jpmorgan Strategic Income or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Jpmorgan Strategic Income

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Jpmorgan Strategic Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Strategic Income are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jpmorgan Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and Jpmorgan Strategic

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

The idea behind Vanguard Small Cap Index and Jpmorgan Strategic Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.