Correlation Between HE Equipment and JPMORGAN

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Can any of the company-specific risk be diversified away by investing in both HE Equipment and JPMORGAN 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 HE Equipment and JPMORGAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and JPMORGAN CHASE CO, you can compare the effects of market volatilities on HE Equipment and JPMORGAN 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 HE Equipment with a short position of JPMORGAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and JPMORGAN.

Diversification Opportunities for HE Equipment and JPMORGAN

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HEES and JPMORGAN is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and JPMORGAN CHASE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMORGAN CHASE CO and HE Equipment 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 HE Equipment Services are associated (or correlated) with JPMORGAN. 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 CO has no effect on the direction of HE Equipment i.e., HE Equipment and JPMORGAN go up and down completely randomly.

Pair Corralation between HE Equipment and JPMORGAN

Given the investment horizon of 90 days HE Equipment Services is expected to generate 2.17 times more return on investment than JPMORGAN. However, HE Equipment is 2.17 times more volatile than JPMORGAN CHASE CO. It trades about 0.04 of its potential returns per unit of risk. JPMORGAN CHASE CO is currently generating about -0.02 per unit of risk. If you would invest  4,388  in HE Equipment Services on September 3, 2024 and sell it today you would earn a total of  1,586  from holding HE Equipment Services or generate 36.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.17%
ValuesDaily Returns

HE Equipment Services  vs.  JPMORGAN CHASE CO

 Performance 
       Timeline  
HE Equipment Services 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.
JPMORGAN CHASE CO 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for JPMORGAN CHASE CO investors.

HE Equipment and JPMORGAN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HE Equipment and JPMORGAN

The main advantage of trading using opposite HE Equipment and JPMORGAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, JPMORGAN 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 will offset losses from the drop in JPMORGAN's long position.
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The idea behind HE Equipment Services 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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