Correlation Between JPMorgan Chase and Best Buy

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

Diversification Opportunities for JPMorgan Chase and Best Buy

-0.57

Correlation Coefficient

JPMorgan Chase  Best Buy

Excellent diversification

The 3 months correlation between JPMorgan and Best is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Best Buy go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Best Buy

Assuming the 90 days trading horizon JPMorgan Chase Co is expected to generate 1.33 times more return on investment than Best Buy. However, JPMorgan Chase is 1.33 times more volatile than Best Buy Co. It trades about 0.35 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.32 per unit of risk. If you would invest  14,679  in JPMorgan Chase Co on October 24, 2024 and sell it today you would earn a total of  1,228  from holding JPMorgan Chase Co or generate 8.37% 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.  Best Buy Co

JPMorgan Chase

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, JPMorgan Chase sustained solid returns over the last few months and may actually be approaching a breakup point.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with JPMorgan Chase and Best Buy

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

The idea behind JPMorgan Chase Co and Best Buy Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.