Correlation Between JPMorgan Chase and American Express

Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and American Express 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 American Express 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 American Express, you can compare the effects of market volatilities on JPMorgan Chase and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and American Express.

Diversification Opportunities for JPMorgan Chase and American Express

0.96

Correlation Coefficient

JPMorgan Chase  American Express

Almost no diversification

The 3 months correlation between JPMorgan and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and American Express go up and down completely randomly.

Pair Corralation between JPMorgan Chase and American Express

Assuming the 90 days trading horizon JPMorgan Chase Co is expected to generate 1.13 times more return on investment than American Express. However, JPMorgan Chase is 1.13 times more volatile than American Express. It trades about 0.23 of its potential returns per unit of risk. American Express is currently generating about 0.24 per unit of risk. If you would invest  11,478  in JPMorgan Chase Co on September 28, 2024 and sell it today you would earn a total of  3,577  from holding JPMorgan Chase Co or generate 31.16% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  American Express

JPMorgan Chase

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, JPMorgan Chase sustained solid returns over the last few months and may actually be approaching a breakup point.

American Express

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, American Express sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and American Express

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

The idea behind JPMorgan Chase Co and American Express 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.