Correlation Between Red River and JPMorgan Chase

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

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

Diversification Opportunities for Red River and JPMorgan Chase

0.63

Correlation Coefficient

Red River  JPMorgan Chase

Poor diversification

The 3 months correlation between Red and JPMorgan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Red River Bancshares and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Red River 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 Red River Bancshares 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 Red River i.e., Red River and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Red River and JPMorgan Chase

Given the investment horizon of 90 days Red River Bancshares is expected to under-perform the JPMorgan Chase. In addition to that, Red River is 1.09 times more volatile than JPMorgan Chase Co. It trades about -0.03 of its total potential returns per unit of risk. JPMorgan Chase Co is currently generating about 0.04 per unit of volatility. If you would invest  23,993  in JPMorgan Chase Co on December 27, 2024 and sell it today you would earn a total of  819.00  from holding JPMorgan Chase Co or generate 3.41% return on investment over 90 days.

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

Red River Bancshares  vs.  JPMorgan Chase Co

Red River Bancshares

Risk-Adjusted Performance

Very Weak

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

JPMorgan Chase

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 3 (%) 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.

Pair Trading with Red River and JPMorgan Chase

The main advantage of trading using opposite Red River and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red River 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 Red River Bancshares 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.