Correlation Between JPMorgan Ultra and Western Asset

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

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

Diversification Opportunities for JPMorgan Ultra and Western Asset

-0.65

Correlation Coefficient

JPMorgan Ultra  Western Asset

Excellent diversification

The 3 months correlation between JPMorgan and Western is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Ultra Short Income and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and JPMorgan Ultra 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 Ultra Short Income are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of JPMorgan Ultra i.e., JPMorgan Ultra and Western Asset go up and down completely randomly.

Pair Corralation between JPMorgan Ultra and Western Asset

Given the investment horizon of 90 days JPMorgan Ultra is expected to generate 1.94 times less return on investment than Western Asset. But when comparing it to its historical volatility, JPMorgan Ultra Short Income is 18.76 times less risky than Western Asset. It trades about 0.9 of its potential returns per unit of risk. Western Asset High is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,150  in Western Asset High on February 13, 2024 and sell it today you would earn a total of  10.00  from holding Western Asset High or generate 0.87% return on investment over 90 days.

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

JPMorgan Ultra Short Income  vs.  Western Asset High

JPMorgan Ultra Short

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Ultra Short Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JPMorgan Ultra is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with JPMorgan Ultra and Western Asset

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

The idea behind JPMorgan Ultra Short Income and Western Asset High 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.