Correlation Between Western Asset and Jpmorgan Short

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

By analyzing existing cross correlation between Western Asset Diversified and Jpmorgan Short Intermediate Municipal, you can compare the effects of market volatilities on Western Asset and Jpmorgan Short 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 Western Asset with a short position of Jpmorgan Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Jpmorgan Short.

Diversification Opportunities for Western Asset and Jpmorgan Short

0.74

Correlation Coefficient

Western Asset  Jpmorgan Short

Poor diversification

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

Pair Corralation between Western Asset and Jpmorgan Short

Assuming the 90 days horizon Western Asset Diversified is expected to under-perform the Jpmorgan Short. In addition to that, Western Asset is 1.91 times more volatile than Jpmorgan Short Intermediate Municipal. It trades about -0.19 of its total potential returns per unit of risk. Jpmorgan Short Intermediate Municipal is currently generating about -0.12 per unit of volatility. If you would invest  1,023  in Jpmorgan Short Intermediate Municipal on September 21, 2024 and sell it today you would lose (10.00) from holding Jpmorgan Short Intermediate Municipal or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Western Asset Diversified  vs.  Jpmorgan Short Intermediate Mu

Western Asset Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jpmorgan Short Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Short Intermediate Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Jpmorgan Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Jpmorgan Short

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

The idea behind Western Asset Diversified and Jpmorgan Short Intermediate Municipal 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.