Correlation Between JPMORGAN and Park Electrochemical

Can any of the company-specific risk be diversified away by investing in both JPMORGAN and Park Electrochemical 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 and Park Electrochemical 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 Park Electrochemical, you can compare the effects of market volatilities on JPMORGAN and Park Electrochemical 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 with a short position of Park Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMORGAN and Park Electrochemical.

Diversification Opportunities for JPMORGAN and Park Electrochemical

0.26

Correlation Coefficient

JPMORGAN  Park Electrochemical

Modest diversification

The 3 months correlation between JPMORGAN and Park is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding JPMORGAN CHASE CO and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and JPMORGAN 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 Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of JPMORGAN i.e., JPMORGAN and Park Electrochemical go up and down completely randomly.

Pair Corralation between JPMORGAN and Park Electrochemical

Assuming the 90 days trading horizon JPMORGAN CHASE CO is expected to generate 0.27 times more return on investment than Park Electrochemical. However, JPMORGAN CHASE CO is 3.69 times less risky than Park Electrochemical. It trades about -0.07 of its potential returns per unit of risk. Park Electrochemical is currently generating about -0.07 per unit of risk. If you would invest  8,736  in JPMORGAN CHASE CO on December 2, 2024 and sell it today you would lose (176.00) from holding JPMORGAN CHASE CO or give up 2.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

JPMORGAN CHASE CO  vs.  Park Electrochemical

JPMORGAN CHASE CO

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 basic indicators, JPMORGAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Park Electrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with JPMORGAN and Park Electrochemical

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

The idea behind JPMORGAN CHASE CO and Park Electrochemical 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.