Correlation Between Ultra-short Fixed and Jpmorgan Equity

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

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

Diversification Opportunities for Ultra-short Fixed and Jpmorgan Equity

0.72

Correlation Coefficient

Ultra-short Fixed  Jpmorgan Equity

Poor diversification

The 3 months correlation between Ultra-short and JPMORGAN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Fixed Income and Jpmorgan Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Equity Income and Ultra-short Fixed 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 Ultra Short Fixed Income are associated (or correlated) with Jpmorgan Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Equity Income has no effect on the direction of Ultra-short Fixed i.e., Ultra-short Fixed and Jpmorgan Equity go up and down completely randomly.

Pair Corralation between Ultra-short Fixed and Jpmorgan Equity

Assuming the 90 days horizon Ultra-short Fixed is expected to generate 11.57 times less return on investment than Jpmorgan Equity. But when comparing it to its historical volatility, Ultra Short Fixed Income is 8.37 times less risky than Jpmorgan Equity. It trades about 0.13 of its potential returns per unit of risk. Jpmorgan Equity Income is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,488  in Jpmorgan Equity Income on August 31, 2024 and sell it today you would earn a total of  200.00  from holding Jpmorgan Equity Income or generate 8.04% return on investment over 90 days.

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

Ultra Short Fixed Income  vs.  Jpmorgan Equity Income

Ultra Short Fixed

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Fixed Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Ultra-short Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jpmorgan Equity Income

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Equity Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Jpmorgan Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ultra-short Fixed and Jpmorgan Equity

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

The idea behind Ultra Short Fixed Income and Jpmorgan Equity Income 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..