Correlation Between JPMorgan Chase and Advance Auto

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

Diversification Opportunities for JPMorgan Chase and Advance Auto

0.72

Correlation Coefficient

JPMorgan Chase  Advance Auto

Poor diversification

The 3 months correlation between JPMorgan and Advance is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Advance Auto go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Advance Auto

Assuming the 90 days trading horizon JPMorgan Chase Co is expected to generate 0.47 times more return on investment than Advance Auto. However, JPMorgan Chase Co is 2.13 times less risky than Advance Auto. It trades about -0.04 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.09 per unit of risk. If you would invest  15,003  in JPMorgan Chase Co on December 26, 2024 and sell it today you would lose (689.00) from holding JPMorgan Chase Co or give up 4.59% of portfolio value over 90 days.

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

JPMorgan Chase Co  vs.  Advance Auto Parts

JPMorgan Chase

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Chase Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, JPMorgan Chase is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Advance Auto Parts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JPMorgan Chase and Advance Auto

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

The idea behind JPMorgan Chase Co and Advance Auto Parts 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.