Can any of the company-specific risk be diversified away by investing in both American Funds and Jpmorgan Smartretirement 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 American Funds and Jpmorgan Smartretirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2035 and Jpmorgan Smartretirement 2035, you can compare the effects of market volatilities on American Funds and Jpmorgan Smartretirement 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 American Funds with a short position of Jpmorgan Smartretirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Jpmorgan Smartretirement.
Diversification Opportunities for American Funds and Jpmorgan Smartretirement
The 3 months correlation between American and Jpmorgan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2035 and Jpmorgan Smartretirement 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Smartretirement and American Funds 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 American Funds 2035 are associated (or correlated) with Jpmorgan Smartretirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Smartretirement has no effect on the direction of American Funds i.e., American Funds and Jpmorgan Smartretirement go up and down completely randomly.
Pair Corralation between American Funds and Jpmorgan Smartretirement
Assuming the 90 days horizon American Funds is expected to generate 2.94 times less return on investment than Jpmorgan Smartretirement. But when comparing it to its historical volatility, American Funds 2035 is 1.03 times less risky than Jpmorgan Smartretirement. It trades about 0.02 of its potential returns per unit of risk. Jpmorgan Smartretirement 2035 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,918 in Jpmorgan Smartretirement 2035 on March 6, 2024 and sell it today you would earn a total of 23.00 from holding Jpmorgan Smartretirement 2035 or generate 1.2% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2035 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Smartretirement 2035 are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jpmorgan Smartretirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.