Correlation Between JPMorgan Chase and Texas Capital

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

Diversification Opportunities for JPMorgan Chase and Texas Capital

0.75

Correlation Coefficient

JPMorgan Chase  Texas Capital

Poor diversification

The 3 months correlation between JPMorgan and Texas is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Texas Capital go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Texas Capital

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.81 times more return on investment than Texas Capital. However, JPMorgan Chase Co is 1.24 times less risky than Texas Capital. It trades about 0.07 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about -0.02 per unit of risk. If you would invest  23,809  in JPMorgan Chase Co on December 28, 2024 and sell it today you would earn a total of  1,294  from holding JPMorgan Chase Co or generate 5.43% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Texas Capital Bancshares

JPMorgan Chase

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 5 (%) 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.

Texas Capital Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Texas Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with JPMorgan Chase and Texas Capital

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

The idea behind JPMorgan Chase Co and Texas Capital Bancshares 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.