Correlation Between JPMorgan Chase and American Business

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

Diversification Opportunities for JPMorgan Chase and American Business

0.49

Correlation Coefficient

JPMorgan Chase  American Business

Very weak diversification

The 3 months correlation between JPMorgan and American is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business 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 American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and American Business go up and down completely randomly.

Pair Corralation between JPMorgan Chase and American Business

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 1.56 times less return on investment than American Business. In addition to that, JPMorgan Chase is 1.07 times more volatile than American Business Bk. It trades about 0.03 of its total potential returns per unit of risk. American Business Bk is currently generating about 0.05 per unit of volatility. If you would invest  4,325  in American Business Bk on December 29, 2024 and sell it today you would earn a total of  158.00  from holding American Business Bk or generate 3.65% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  American Business Bk

JPMorgan Chase

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, JPMorgan Chase is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

American Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, American Business is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JPMorgan Chase and American Business

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

The idea behind JPMorgan Chase Co and American Business Bk 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.