Correlation Between Investec Emerging and Jpmorgan Hedged

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

By analyzing existing cross correlation between Investec Emerging Markets and Jpmorgan Hedged Equity, you can compare the effects of market volatilities on Investec Emerging and Jpmorgan Hedged 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 Investec Emerging with a short position of Jpmorgan Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec Emerging and Jpmorgan Hedged.

Diversification Opportunities for Investec Emerging and Jpmorgan Hedged

0.04

Correlation Coefficient

Investec Emerging  Jpmorgan Hedged

Significant diversification

The 3 months correlation between Investec and Jpmorgan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Jpmorgan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Hedged Equity and Investec Emerging 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 Investec Emerging Markets are associated (or correlated) with Jpmorgan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Hedged Equity has no effect on the direction of Investec Emerging i.e., Investec Emerging and Jpmorgan Hedged go up and down completely randomly.

Pair Corralation between Investec Emerging and Jpmorgan Hedged

Assuming the 90 days horizon Investec Emerging Markets is expected to generate 1.82 times more return on investment than Jpmorgan Hedged. However, Investec Emerging is 1.82 times more volatile than Jpmorgan Hedged Equity. It trades about 0.1 of its potential returns per unit of risk. Jpmorgan Hedged Equity is currently generating about -0.06 per unit of risk. If you would invest  1,066  in Investec Emerging Markets on December 21, 2024 and sell it today you would earn a total of  63.00  from holding Investec Emerging Markets or generate 5.91% return on investment over 90 days.

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

Investec Emerging Markets  vs.  Jpmorgan Hedged Equity

Investec Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Investec Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Jpmorgan Hedged Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jpmorgan Hedged Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Jpmorgan Hedged is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investec Emerging and Jpmorgan Hedged

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

The idea behind Investec Emerging Markets and Jpmorgan Hedged Equity 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.