Correlation Between JPMorgan Chase and Visa

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

Diversification Opportunities for JPMorgan Chase and Visa

0.95

Correlation Coefficient

JPMorgan Chase  Visa

Almost no diversification

The 3 months correlation between JPMorgan and Visa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Visa go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Visa

Assuming the 90 days trading horizon JPMorgan Chase Co is expected to under-perform the Visa. In addition to that, JPMorgan Chase is 1.03 times more volatile than Visa Inc. It trades about -0.29 of its total potential returns per unit of risk. Visa Inc is currently generating about 0.06 per unit of volatility. If you would invest  631,200  in Visa Inc on September 24, 2024 and sell it today you would earn a total of  7,300  from holding Visa Inc or generate 1.16% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Visa Inc

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.

Visa Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and Visa

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

The idea behind JPMorgan Chase Co and Visa Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.