Correlation Between Costco Wholesale and JPMorgan Chase

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

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

Diversification Opportunities for Costco Wholesale and JPMorgan Chase

0.88

Correlation Coefficient

Costco Wholesale  JPMorgan Chase

Very poor diversification

The 3 months correlation between Costco and JPMorgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Costco Wholesale 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 Costco Wholesale are associated (or correlated) with JPMorgan Chase. 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 has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Costco Wholesale and JPMorgan Chase

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.27 times less return on investment than JPMorgan Chase. But when comparing it to its historical volatility, Costco Wholesale is 1.42 times less risky than JPMorgan Chase. It trades about 0.19 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  398,593  in JPMorgan Chase Co on September 14, 2024 and sell it today you would earn a total of  91,107  from holding JPMorgan Chase Co or generate 22.86% return on investment over 90 days.

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

Costco Wholesale  vs.  JPMorgan Chase Co

Costco Wholesale

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Costco Wholesale showed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Chase

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Costco Wholesale and JPMorgan Chase

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

The idea behind Costco Wholesale 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.