Correlation Between JPMorgan Chase and Liontown Resources

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

Diversification Opportunities for JPMorgan Chase and Liontown Resources

0.3

Correlation Coefficient

JPMorgan Chase  Liontown Resources

Weak diversification

The 3 months correlation between JPMorgan and Liontown is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources 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 Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Liontown Resources go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Liontown Resources

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.34 times more return on investment than Liontown Resources. However, JPMorgan Chase Co is 2.95 times less risky than Liontown Resources. It trades about 0.18 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.04 per unit of risk. If you would invest  23,809  in JPMorgan Chase Co on November 29, 2024 and sell it today you would earn a total of  2,070  from holding JPMorgan Chase Co or generate 8.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

JPMorgan Chase Co  vs.  Liontown Resources Limited

JPMorgan Chase

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 4 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Liontown Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liontown Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with JPMorgan Chase and Liontown Resources

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

The idea behind JPMorgan Chase Co and Liontown Resources Limited 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.