Correlation Between JPMorgan Chase and American Rare

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

Diversification Opportunities for JPMorgan Chase and American Rare

0.45

Correlation Coefficient

JPMorgan Chase  American Rare

Very weak diversification

The 3 months correlation between JPMorgan and American is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths 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 Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and American Rare go up and down completely randomly.

Pair Corralation between JPMorgan Chase and American Rare

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 2.12 times less return on investment than American Rare. But when comparing it to its historical volatility, JPMorgan Chase Co is 5.56 times less risky than American Rare. It trades about 0.11 of its potential returns per unit of risk. American Rare Earths is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15.00  in American Rare Earths on November 20, 2024 and sell it today you would earn a total of  4.00  from holding American Rare Earths or generate 26.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

JPMorgan Chase Co  vs.  American Rare Earths

JPMorgan Chase

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.

American Rare Earths

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JPMorgan Chase and American Rare

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

The idea behind JPMorgan Chase Co and American Rare Earths 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.