Correlation Between JPMorgan Chase and Five Star

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

Diversification Opportunities for JPMorgan Chase and Five Star

0.94

Correlation Coefficient

JPMorgan Chase  Five Star

Almost no diversification

The 3 months correlation between JPMorgan and Five is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp 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 Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Five Star go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Five Star

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.66 times more return on investment than Five Star. However, JPMorgan Chase Co is 1.51 times less risky than Five Star. It trades about 0.12 of its potential returns per unit of risk. Five Star Bancorp is currently generating about 0.07 per unit of risk. If you would invest  14,492  in JPMorgan Chase Co on September 12, 2024 and sell it today you would earn a total of  9,794  from holding JPMorgan Chase Co or generate 67.58% 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.  Five Star Bancorp

JPMorgan Chase

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 11 (%) 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.

Five Star Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Five Star Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Five Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and Five Star

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

The idea behind JPMorgan Chase Co and Five Star Bancorp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.