Correlation Between Jpmorgan Hedged and Princeton Premium

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

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

Diversification Opportunities for Jpmorgan Hedged and Princeton Premium

0.78

Correlation Coefficient

Jpmorgan Hedged  Princeton Premium

Poor diversification

The 3 months correlation between Jpmorgan and Princeton is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Hedged Equity and Princeton Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Premium and Jpmorgan Hedged 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 Jpmorgan Hedged Equity are associated (or correlated) with Princeton Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Premium has no effect on the direction of Jpmorgan Hedged i.e., Jpmorgan Hedged and Princeton Premium go up and down completely randomly.

Pair Corralation between Jpmorgan Hedged and Princeton Premium

Assuming the 90 days horizon Jpmorgan Hedged Equity is expected to generate 2.05 times more return on investment than Princeton Premium. However, Jpmorgan Hedged is 2.05 times more volatile than Princeton Premium. It trades about 0.17 of its potential returns per unit of risk. Princeton Premium is currently generating about 0.03 per unit of risk. If you would invest  1,790  in Jpmorgan Hedged Equity on September 16, 2024 and sell it today you would earn a total of  80.00  from holding Jpmorgan Hedged Equity or generate 4.47% return on investment over 90 days.

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

Jpmorgan Hedged Equity  vs.  Princeton Premium

Jpmorgan Hedged Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Hedged Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. 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.

Princeton Premium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Premium are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Princeton Premium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jpmorgan Hedged and Princeton Premium

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

The idea behind Jpmorgan Hedged Equity and Princeton Premium 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.