Correlation Between JP Morgan and Vanguard

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

By analyzing existing cross correlation between JP Morgan Exchange Traded and Vanguard SP 500, you can compare the effects of market volatilities on JP Morgan and Vanguard 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 JP Morgan with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of JP Morgan and Vanguard.

Diversification Opportunities for JP Morgan and Vanguard

0.74

Correlation Coefficient

JP Morgan  Vanguard

Poor diversification

The 3 months correlation between JCTR and Vanguard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Exchange Traded and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and JP Morgan 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 JP Morgan Exchange Traded are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of JP Morgan i.e., JP Morgan and Vanguard go up and down completely randomly.

Pair Corralation between JP Morgan and Vanguard

Given the investment horizon of 90 days JP Morgan Exchange Traded is expected to generate 1.06 times more return on investment than Vanguard. However, JP Morgan is 1.06 times more volatile than Vanguard SP 500. It trades about 0.22 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.21 per unit of risk. If you would invest  7,529  in JP Morgan Exchange Traded on September 12, 2024 and sell it today you would earn a total of  761.00  from holding JP Morgan Exchange Traded or generate 10.11% return on investment over 90 days.

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

JP Morgan Exchange Traded  vs.  Vanguard SP 500

JP Morgan Exchange

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, JP Morgan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard SP 500

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JP Morgan and Vanguard

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

The idea behind JP Morgan Exchange Traded and Vanguard SP 500 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.