Correlation Between JPMorgan Chase and Invesco NASDAQ

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

Diversification Opportunities for JPMorgan Chase and Invesco NASDAQ

0.8

Correlation Coefficient

JPMorgan Chase  Invesco NASDAQ

Very poor diversification

The 3 months correlation between JPMorgan and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Invesco NASDAQ Next in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ Next 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 Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ Next has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Invesco NASDAQ go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Invesco NASDAQ

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 1.27 times more return on investment than Invesco NASDAQ. However, JPMorgan Chase is 1.27 times more volatile than Invesco NASDAQ Next. It trades about 0.03 of its potential returns per unit of risk. Invesco NASDAQ Next is currently generating about -0.07 per unit of risk. If you would invest  23,809  in JPMorgan Chase Co on December 29, 2024 and sell it today you would earn a total of  476.00  from holding JPMorgan Chase Co or generate 2.0% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Invesco NASDAQ Next

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.

Invesco NASDAQ Next

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ Next has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco NASDAQ is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with JPMorgan Chase and Invesco NASDAQ

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

The idea behind JPMorgan Chase Co and Invesco NASDAQ Next 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.