Correlation Between Merchants Bancorp and JPMorgan Chase

Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and JPMorgan Chase 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 Merchants Bancorp and JPMorgan Chase into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merchants Bancorp and JPMorgan Chase Co, you can compare the effects of market volatilities on Merchants Bancorp and JPMorgan Chase 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 Merchants Bancorp with a short position of JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and JPMorgan Chase.

Diversification Opportunities for Merchants Bancorp and JPMorgan Chase

0.34

Correlation Coefficient

Merchants Bancorp  JPMorgan Chase

Weak diversification

The 3 months correlation between Merchants and JPMorgan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Merchants Bancorp 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 Merchants Bancorp are associated (or correlated) with JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Merchants Bancorp and JPMorgan Chase

Assuming the 90 days horizon Merchants Bancorp is expected to under-perform the JPMorgan Chase. But the stock apears to be less risky and, when comparing its historical volatility, Merchants Bancorp is 1.13 times less risky than JPMorgan Chase. The stock trades about -0.02 of its potential returns per unit of risk. The JPMorgan Chase Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  23,956  in JPMorgan Chase Co on September 13, 2024 and sell it today you would earn a total of  397.00  from holding JPMorgan Chase Co or generate 1.66% return on investment over 90 days.

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

Merchants Bancorp  vs.  JPMorgan Chase Co

Merchants Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Merchants Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

JPMorgan Chase

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 12 (%) 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.

Pair Trading with Merchants Bancorp and JPMorgan Chase

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

The idea behind Merchants Bancorp and JPMorgan Chase 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.