Correlation Between JPMorgan Chase and Morgan Stanley

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

Diversification Opportunities for JPMorgan Chase and Morgan Stanley

0.87

Correlation Coefficient

JPMorgan Chase  Morgan Stanley

Very poor diversification

The 3 months correlation between JPMorgan and Morgan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Morgan Stanley go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Morgan Stanley

Assuming the 90 days trading horizon JPMorgan Chase is expected to generate 5.17 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.18 times less risky than Morgan Stanley. It trades about 0.01 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,790  in Morgan Stanley on December 30, 2024 and sell it today you would earn a total of  39.00  from holding Morgan Stanley or generate 2.18% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Morgan Stanley

JPMorgan Chase

Risk-Adjusted Performance

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 quite persistent primary indicators, JPMorgan Chase is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Morgan Stanley

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with JPMorgan Chase and Morgan Stanley

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

The idea behind JPMorgan Chase Co and Morgan Stanley 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.