Correlation Between Vanguard Russell and JPMorgan Market

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

By analyzing existing cross correlation between Vanguard Russell 2000 and JPMorgan Market Expansion, you can compare the effects of market volatilities on Vanguard Russell and JPMorgan Market 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 Vanguard Russell with a short position of JPMorgan Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and JPMorgan Market.

Diversification Opportunities for Vanguard Russell and JPMorgan Market

0.99

Correlation Coefficient

Vanguard Russell  JPMorgan Market

No risk reduction

The 3 months correlation between Vanguard and JPMorgan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and JPMorgan Market Expansion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Market Expansion and Vanguard Russell 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 Vanguard Russell 2000 are associated (or correlated) with JPMorgan Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Market Expansion has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and JPMorgan Market go up and down completely randomly.

Pair Corralation between Vanguard Russell and JPMorgan Market

Given the investment horizon of 90 days Vanguard Russell 2000 is expected to under-perform the JPMorgan Market. In addition to that, Vanguard Russell is 1.12 times more volatile than JPMorgan Market Expansion. It trades about -0.14 of its total potential returns per unit of risk. JPMorgan Market Expansion is currently generating about -0.15 per unit of volatility. If you would invest  6,311  in JPMorgan Market Expansion on September 20, 2024 and sell it today you would lose (239.00) from holding JPMorgan Market Expansion or give up 3.79% of portfolio value over 90 days.

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

Vanguard Russell 2000  vs.  JPMorgan Market Expansion

Vanguard Russell 2000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Russell is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

JPMorgan Market Expansion

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Market Expansion are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, JPMorgan Market is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Russell and JPMorgan Market

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

The idea behind Vanguard Russell 2000 and JPMorgan Market Expansion 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.