Correlation Between JPMorgan Chase and US Financial

Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and US Financial 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 US Financial 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 US Financial 15, you can compare the effects of market volatilities on JPMorgan Chase and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and US Financial.

Diversification Opportunities for JPMorgan Chase and US Financial

0.89

Correlation Coefficient

JPMorgan Chase  US Financial

Very poor diversification

The 3 months correlation between JPMorgan and FTU-PB is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and US Financial go up and down completely randomly.

Pair Corralation between JPMorgan Chase and US Financial

Assuming the 90 days trading horizon JPMorgan Chase is expected to generate 1.3 times less return on investment than US Financial. In addition to that, JPMorgan Chase is 1.06 times more volatile than US Financial 15. It trades about 0.1 of its total potential returns per unit of risk. US Financial 15 is currently generating about 0.14 per unit of volatility. If you would invest  659.00  in US Financial 15 on September 4, 2024 and sell it today you would earn a total of  113.00  from holding US Financial 15 or generate 17.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

JPMorgan Chase Co  vs.  US Financial 15

JPMorgan Chase

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 7 (%) 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.

US Financial 15

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, US Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and US Financial

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

The idea behind JPMorgan Chase Co and US Financial 15 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.