Correlation Between Dynamic Allocation and Jpmorgan Hedged

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

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

Diversification Opportunities for Dynamic Allocation and Jpmorgan Hedged

0.88

Correlation Coefficient

Dynamic Allocation  Jpmorgan Hedged

Very poor diversification

The 3 months correlation between Dynamic and Jpmorgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Allocation Fund and Jpmorgan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Hedged Equity and Dynamic Allocation 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 Dynamic Allocation Fund are associated (or correlated) with Jpmorgan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Hedged Equity has no effect on the direction of Dynamic Allocation i.e., Dynamic Allocation and Jpmorgan Hedged go up and down completely randomly.

Pair Corralation between Dynamic Allocation and Jpmorgan Hedged

Assuming the 90 days horizon Dynamic Allocation is expected to generate 1.67 times less return on investment than Jpmorgan Hedged. But when comparing it to its historical volatility, Dynamic Allocation Fund is 1.03 times less risky than Jpmorgan Hedged. It trades about 0.14 of its potential returns per unit of risk. Jpmorgan Hedged Equity is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,154  in Jpmorgan Hedged Equity on August 31, 2024 and sell it today you would earn a total of  217.00  from holding Jpmorgan Hedged Equity or generate 6.88% return on investment over 90 days.

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

Dynamic Allocation Fund  vs.  Jpmorgan Hedged Equity

Dynamic Allocation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Allocation Fund 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, Dynamic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jpmorgan Hedged Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Hedged Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Jpmorgan Hedged may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dynamic Allocation and Jpmorgan Hedged

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

The idea behind Dynamic Allocation Fund and Jpmorgan Hedged Equity 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.