Correlation Between Jensen Quality and Jensen Portfolio
Can any of the company-specific risk be diversified away by investing in both Jensen Quality and Jensen Portfolio 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 Jensen Quality and Jensen Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jensen Quality Value and The Jensen Portfolio, you can compare the effects of market volatilities on Jensen Quality and Jensen Portfolio 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 Jensen Quality with a short position of Jensen Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jensen Quality and Jensen Portfolio.
Diversification Opportunities for Jensen Quality and Jensen Portfolio
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Jensen and Jensen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Jensen Quality Value and The Jensen Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Portfolio and Jensen Quality 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 Jensen Quality Value are associated (or correlated) with Jensen Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Portfolio has no effect on the direction of Jensen Quality i.e., Jensen Quality and Jensen Portfolio go up and down completely randomly.
Pair Corralation between Jensen Quality and Jensen Portfolio
Assuming the 90 days horizon Jensen Quality Value is expected to generate 0.66 times more return on investment than Jensen Portfolio. However, Jensen Quality Value is 1.52 times less risky than Jensen Portfolio. It trades about 0.0 of its potential returns per unit of risk. The Jensen Portfolio is currently generating about -0.11 per unit of risk. If you would invest 1,992 in Jensen Quality Value on September 1, 2024 and sell it today you would lose (8.00) from holding Jensen Quality Value or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jensen Quality Value vs. The Jensen Portfolio
Performance |
| Timeline |
| Jensen Quality Value |
| Jensen Portfolio |
Jensen Quality and Jensen Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jensen Quality and Jensen Portfolio
The main advantage of trading using opposite Jensen Quality and Jensen Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jensen Quality position performs unexpectedly, Jensen Portfolio 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 Jensen Portfolio will offset losses from the drop in Jensen Portfolio's long position.| Jensen Quality vs. The Jensen Portfolio | Jensen Quality vs. The Jensen Portfolio | Jensen Quality vs. The Jensen Portfolio | Jensen Quality vs. The Jensen Portfolio |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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