Correlation Between Visa and JPMORGAN

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

By analyzing existing cross correlation between Visa Class A and JPMORGAN CHASE CO, you can compare the effects of market volatilities on Visa and JPMORGAN 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 Visa with a short position of JPMORGAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and JPMORGAN.

Diversification Opportunities for Visa and JPMORGAN

-0.48

Correlation Coefficient

Visa  JPMORGAN

Very good diversification

The 3 months correlation between Visa and JPMORGAN is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and JPMORGAN CHASE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMORGAN CHASE CO and Visa 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 Visa Class A are associated (or correlated) with JPMORGAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMORGAN CHASE CO has no effect on the direction of Visa i.e., Visa and JPMORGAN go up and down completely randomly.

Pair Corralation between Visa and JPMORGAN

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.31 times more return on investment than JPMORGAN. However, Visa is 1.31 times more volatile than JPMORGAN CHASE CO. It trades about 0.17 of its potential returns per unit of risk. JPMORGAN CHASE CO is currently generating about -0.11 per unit of risk. If you would invest  27,584  in Visa Class A on August 30, 2024 and sell it today you would earn a total of  3,886  from holding Visa Class A or generate 14.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Visa Class A  vs.  JPMORGAN CHASE CO

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

JPMORGAN CHASE CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMORGAN CHASE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for JPMORGAN CHASE CO investors.

Pair Trading with Visa and JPMORGAN

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

The idea behind Visa Class A and JPMORGAN CHASE CO 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.