Correlation Between Jpmorgan Government and Prudential High

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

By analyzing existing cross correlation between Jpmorgan Government Bond and Prudential High Yield, you can compare the effects of market volatilities on Jpmorgan Government and Prudential High 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 Jpmorgan Government with a short position of Prudential High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jpmorgan Government and Prudential High.

Diversification Opportunities for Jpmorgan Government and Prudential High

0.27

Correlation Coefficient

Jpmorgan Government  Prudential High

Modest diversification

The 3 months correlation between Jpmorgan and Prudential is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Government Bond and Prudential High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential High Yield and Jpmorgan Government 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 Jpmorgan Government Bond are associated (or correlated) with Prudential High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential High Yield has no effect on the direction of Jpmorgan Government i.e., Jpmorgan Government and Prudential High go up and down completely randomly.

Pair Corralation between Jpmorgan Government and Prudential High

Assuming the 90 days horizon Jpmorgan Government Bond is expected to under-perform the Prudential High. In addition to that, Jpmorgan Government is 1.21 times more volatile than Prudential High Yield. It trades about -0.26 of its total potential returns per unit of risk. Prudential High Yield is currently generating about -0.16 per unit of volatility. If you would invest  469.00  in Prudential High Yield on January 26, 2024 and sell it today you would lose (5.00) from holding Prudential High Yield or give up 1.07% of portfolio value over 90 days.

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

Jpmorgan Government Bond  vs.  Prudential High Yield

Jpmorgan Government Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prudential High Yield

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential High Yield are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jpmorgan Government and Prudential High

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

The idea behind Jpmorgan Government Bond and Prudential High Yield 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 Global Correlations module to find global opportunities by holding instruments from different markets.