Correlation Between HSBC Holdings and JPMorgan Chase

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

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

Diversification Opportunities for HSBC Holdings and JPMorgan Chase

0.87

Correlation Coefficient

HSBC Holdings  JPMorgan Chase

Very poor diversification

The 3 months correlation between HSBC and JPMorgan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and HSBC Holdings 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 HSBC Holdings plc 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 HSBC Holdings i.e., HSBC Holdings and JPMorgan Chase go up and down completely randomly.

Pair Corralation between HSBC Holdings and JPMorgan Chase

Assuming the 90 days trading horizon HSBC Holdings is expected to generate 1.08 times less return on investment than JPMorgan Chase. In addition to that, HSBC Holdings is 1.05 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 0.09 per unit of volatility. If you would invest  248,726  in JPMorgan Chase Co on September 23, 2024 and sell it today you would earn a total of  229,774  from holding JPMorgan Chase Co or generate 92.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

HSBC Holdings plc  vs.  JPMorgan Chase Co

HSBC Holdings plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, HSBC Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Chase

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 10 (%) 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 HSBC Holdings and JPMorgan Chase

The main advantage of trading using opposite HSBC Holdings and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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 HSBC Holdings plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.