Correlation Between US Bancorp and JPMorgan Chase

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

Diversification Opportunities for US Bancorp and JPMorgan Chase

0.34

Correlation Coefficient

US Bancorp  JPMorgan Chase

Weak diversification

The 3 months correlation between USB-PP and JPMorgan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding US 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 US 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 US 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 US Bancorp i.e., US Bancorp and JPMorgan Chase go up and down completely randomly.

Pair Corralation between US Bancorp and JPMorgan Chase

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.61 times more return on investment than JPMorgan Chase. However, US Bancorp is 1.63 times less risky than JPMorgan Chase. It trades about 0.08 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.05 per unit of risk. If you would invest  2,444  in US Bancorp on September 2, 2024 and sell it today you would earn a total of  68.00  from holding US Bancorp or generate 2.78% return on investment over 90 days.

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

US Bancorp  vs.  JPMorgan Chase Co

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, US Bancorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

JPMorgan Chase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Chase Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, JPMorgan Chase is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with US Bancorp and JPMorgan Chase

The main advantage of trading using opposite US Bancorp and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US 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 US 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.