Correlation Between Select Sector and JPMorgan Chase

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

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

Diversification Opportunities for Select Sector and JPMorgan Chase

0.71

Correlation Coefficient

Select Sector  JPMorgan Chase

Poor diversification

The 3 months correlation between Select and JPMorgan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Select Sector and JPMorgan Chase

Assuming the 90 days trading horizon The Select Sector is expected to generate 1.31 times more return on investment than JPMorgan Chase. However, Select Sector is 1.31 times more volatile than JPMorgan Chase Co. It trades about -0.06 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.09 per unit of risk. If you would invest  159,961  in The Select Sector on September 17, 2024 and sell it today you would lose (3,079) from holding The Select Sector or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

The Select Sector  vs.  JPMorgan Chase Co

Select Sector

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Select Sector are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Select Sector is not utilizing all of its potentials. The current stock price disturbance, 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 fairly weak primary indicators, JPMorgan Chase showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Select Sector and JPMorgan Chase

The main advantage of trading using opposite Select Sector and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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 The Select Sector 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.