Correlation Between Bank of America and JPMorgan Chase
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and JPMorgan Chase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and JPMorgan Chase Financial, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and JPMorgan Chase.
Diversification Opportunities for Bank of America and JPMorgan Chase
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and JPMorgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and JPMorgan Chase Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase Financial and Bank of America 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 Bank of America 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 Financial has no effect on the direction of Bank of America i.e., Bank of America and JPMorgan Chase go up and down completely randomly.
Pair Corralation between Bank of America and JPMorgan Chase
Considering the 90-day investment horizon Bank of America is expected to generate 1.64 times more return on investment than JPMorgan Chase. However, Bank of America is 1.64 times more volatile than JPMorgan Chase Financial. It trades about 0.14 of its potential returns per unit of risk. JPMorgan Chase Financial is currently generating about 0.12 per unit of risk. If you would invest 2,756 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,995 from holding Bank of America or generate 72.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 79.93% |
| Values | Daily Returns |
Bank of America vs. JPMorgan Chase Financial
Performance |
| Timeline |
| Bank of America |
| JPMorgan Chase Financial |
Bank of America and JPMorgan Chase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and JPMorgan Chase
The main advantage of trading using opposite Bank of America and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| JPMorgan Chase vs. First Trust North | JPMorgan Chase vs. Global X MLP | JPMorgan Chase vs. Tortoise North American | JPMorgan Chase vs. UBS AG London |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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