Correlation Between JPMorgan Chase and CHEVRON CDR

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

Diversification Opportunities for JPMorgan Chase and CHEVRON CDR

0.88

Correlation Coefficient

JPMorgan Chase  CHEVRON CDR

Very poor diversification

The 3 months correlation between JPMorgan and CHEVRON is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR 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 CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and CHEVRON CDR go up and down completely randomly.

Pair Corralation between JPMorgan Chase and CHEVRON CDR

Assuming the 90 days trading horizon JPMorgan Chase Co is expected to generate 1.8 times more return on investment than CHEVRON CDR. However, JPMorgan Chase is 1.8 times more volatile than CHEVRON CDR. It trades about 0.11 of its potential returns per unit of risk. CHEVRON CDR is currently generating about 0.18 per unit of risk. If you would invest  2,922  in JPMorgan Chase Co on September 1, 2024 and sell it today you would earn a total of  422.00  from holding JPMorgan Chase Co or generate 14.44% 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.  CHEVRON CDR

JPMorgan Chase

Risk-Adjusted Performance

8 of 100

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 unfluctuating basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.

CHEVRON CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, CHEVRON CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and CHEVRON CDR

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

The idea behind JPMorgan Chase Co and CHEVRON CDR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.