Correlation Between Vanguard FTSE and JPM AC

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

By analyzing existing cross correlation between Vanguard FTSE Developed and JPM AC Asia, you can compare the effects of market volatilities on Vanguard FTSE and JPM AC 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 FTSE with a short position of JPM AC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and JPM AC.

Diversification Opportunities for Vanguard FTSE and JPM AC

0.19

Correlation Coefficient

Vanguard FTSE  JPM AC

Average diversification

The 3 months correlation between Vanguard and JPM is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and JPM AC Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM AC Asia and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with JPM AC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM AC Asia has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and JPM AC go up and down completely randomly.

Pair Corralation between Vanguard FTSE and JPM AC

Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to generate 1.16 times more return on investment than JPM AC. However, Vanguard FTSE is 1.16 times more volatile than JPM AC Asia. It trades about 0.21 of its potential returns per unit of risk. JPM AC Asia is currently generating about 0.01 per unit of risk. If you would invest  4,627  in Vanguard FTSE Developed on December 23, 2024 and sell it today you would earn a total of  655.00  from holding Vanguard FTSE Developed or generate 14.16% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  JPM AC Asia

Vanguard FTSE Developed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

JPM AC Asia

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPM AC Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, JPM AC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard FTSE and JPM AC

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

The idea behind Vanguard FTSE Developed and JPM AC Asia 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.