Correlation Between Vanguard Russell and JPMorgan Diversified

Can any of the company-specific risk be diversified away by investing in both Vanguard Russell and JPMorgan Diversified 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 Diversified 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 Diversified Return, you can compare the effects of market volatilities on Vanguard Russell and JPMorgan Diversified 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 Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and JPMorgan Diversified.

Diversification Opportunities for Vanguard Russell and JPMorgan Diversified

0.79

Correlation Coefficient

Vanguard Russell  JPMorgan Diversified

Poor diversification

The 3 months correlation between Vanguard and JPMorgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified 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 Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Diversified has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between Vanguard Russell and JPMorgan Diversified

Assuming the 90 days horizon Vanguard Russell 2000 is expected to under-perform the JPMorgan Diversified. In addition to that, Vanguard Russell is 1.15 times more volatile than JPMorgan Diversified Return. It trades about -0.06 of its total potential returns per unit of risk. JPMorgan Diversified Return is currently generating about -0.01 per unit of volatility. If you would invest  4,440  in JPMorgan Diversified Return on February 7, 2024 and sell it today you would lose (11.00) from holding JPMorgan Diversified Return or give up 0.25% of portfolio value over 90 days.

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

Vanguard Russell 2000  vs.  JPMorgan Diversified Return

Vanguard Russell 2000

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Vanguard Russell is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

JPMorgan Diversified

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, JPMorgan Diversified 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 Diversified

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

The idea behind Vanguard Russell 2000 and JPMorgan Diversified Return 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.