Correlation Between JPMorgan Chase and World Oil

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

Diversification Opportunities for JPMorgan Chase and World Oil

-0.43

Correlation Coefficient

JPMorgan Chase  World Oil

Very good diversification

The 3 months correlation between JPMorgan and World is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and World Oil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Oil Group 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 World Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Oil Group has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and World Oil go up and down completely randomly.

Pair Corralation between JPMorgan Chase and World Oil

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 4.02 times less return on investment than World Oil. But when comparing it to its historical volatility, JPMorgan Chase Co is 7.78 times less risky than World Oil. It trades about 0.13 of its potential returns per unit of risk. World Oil Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.46  in World Oil Group on September 4, 2024 and sell it today you would earn a total of  0.54  from holding World Oil Group or generate 36.99% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  World Oil Group

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 unsteady basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.

World Oil Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in World Oil Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, World Oil demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and World Oil

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

The idea behind JPMorgan Chase Co and World Oil Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.