Correlation Between Eastern Bankshares and JPMorgan Chase

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

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

Diversification Opportunities for Eastern Bankshares and JPMorgan Chase

0.61

Correlation Coefficient

Eastern Bankshares  JPMorgan Chase

Poor diversification

The 3 months correlation between Eastern and JPMorgan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Bankshares and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Eastern Bankshares 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 Eastern Bankshares 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 Eastern Bankshares i.e., Eastern Bankshares and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Eastern Bankshares and JPMorgan Chase

Considering the 90-day investment horizon Eastern Bankshares is expected to generate 1.05 times less return on investment than JPMorgan Chase. In addition to that, Eastern Bankshares is 1.31 times more volatile than JPMorgan Chase Co. It trades about 0.08 of its total potential returns per unit of risk. JPMorgan Chase Co is currently generating about 0.1 per unit of volatility. If you would invest  18,367  in JPMorgan Chase Co on December 2, 2024 and sell it today you would earn a total of  8,098  from holding JPMorgan Chase Co or generate 44.09% return on investment over 90 days.

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

Eastern Bankshares  vs.  JPMorgan Chase Co

Eastern Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Eastern Bankshares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan Chase

Risk-Adjusted Performance

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 unsteady basic indicators, JPMorgan Chase may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Eastern Bankshares and JPMorgan Chase

The main advantage of trading using opposite Eastern Bankshares and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Bankshares 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 Eastern Bankshares 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.