Correlation Between JPMorgan Chase and Financial Institutions

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

By analyzing existing cross correlation between JPMorgan Chase Co and Financial Institutions, you can compare the effects of market volatilities on JPMorgan Chase and Financial Institutions 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 Chase with a short position of Financial Institutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Financial Institutions.

Diversification Opportunities for JPMorgan Chase and Financial Institutions

0.72

Correlation Coefficient

JPMorgan Chase  Financial Institutions

Poor diversification

The 3 months correlation between JPMorgan and Financial is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions and JPMorgan Chase 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 Chase Co are associated (or correlated) with Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Financial Institutions go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Financial Institutions

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.78 times more return on investment than Financial Institutions. However, JPMorgan Chase Co is 1.28 times less risky than Financial Institutions. It trades about 0.11 of its potential returns per unit of risk. Financial Institutions is currently generating about 0.06 per unit of risk. If you would invest  21,896  in JPMorgan Chase Co on September 3, 2024 and sell it today you would earn a total of  3,076  from holding JPMorgan Chase Co or generate 14.05% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Financial Institutions

JPMorgan Chase

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.

Financial Institutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Institutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Financial Institutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JPMorgan Chase and Financial Institutions

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

The idea behind JPMorgan Chase Co and Financial Institutions 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.