Correlation Between JPMorgan Fundamental and Soundwatch Hedged

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

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

Diversification Opportunities for JPMorgan Fundamental and Soundwatch Hedged

0.96

Correlation Coefficient

JPMorgan Fundamental  Soundwatch Hedged

Almost no diversification

The 3 months correlation between JPMorgan and Soundwatch is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Fundamental Data and Soundwatch Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soundwatch Hedged Equity and JPMorgan Fundamental 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 Fundamental Data are associated (or correlated) with Soundwatch Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soundwatch Hedged Equity has no effect on the direction of JPMorgan Fundamental i.e., JPMorgan Fundamental and Soundwatch Hedged go up and down completely randomly.

Pair Corralation between JPMorgan Fundamental and Soundwatch Hedged

Given the investment horizon of 90 days JPMorgan Fundamental Data is expected to generate 1.23 times more return on investment than Soundwatch Hedged. However, JPMorgan Fundamental is 1.23 times more volatile than Soundwatch Hedged Equity. It trades about 0.26 of its potential returns per unit of risk. Soundwatch Hedged Equity is currently generating about 0.11 per unit of risk. If you would invest  4,992  in JPMorgan Fundamental Data on September 12, 2024 and sell it today you would earn a total of  870.00  from holding JPMorgan Fundamental Data or generate 17.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	24.93%
Values	Daily Returns

JPMorgan Fundamental Data  vs.  Soundwatch Hedged Equity

JPMorgan Fundamental Data

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Fundamental Data are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, JPMorgan Fundamental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Soundwatch Hedged Equity

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Soundwatch Hedged Equity are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Soundwatch Hedged may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JPMorgan Fundamental and Soundwatch Hedged

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

The idea behind JPMorgan Fundamental Data and Soundwatch 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.