Correlation Between JPMorgan Chase and Bank of America
Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and Bank of America 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 Chase and Bank of America 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 Bank of America, you can compare the effects of market volatilities on JPMorgan Chase and Bank of America 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 Chase with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Bank of America.
Diversification Opportunities for JPMorgan Chase and Bank of America
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JPMorgan and Bank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and JPMorgan Chase 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Bank of America go up and down completely randomly.
Pair Corralation between JPMorgan Chase and Bank of America
Assuming the 90 days trading horizon JPMorgan Chase is expected to generate 2.81 times less return on investment than Bank of America. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.88 times less risky than Bank of America. It trades about 0.06 of its potential returns per unit of risk. Bank of America is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,682 in Bank of America on August 31, 2024 and sell it today you would earn a total of 616.00 from holding Bank of America or generate 36.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
JPMorgan Chase Co vs. Bank of America
Performance |
| Timeline |
| JPMorgan Chase |
| Bank of America |
JPMorgan Chase and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan Chase and Bank of America
The main advantage of trading using opposite JPMorgan Chase and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| JPMorgan Chase vs. JPMorgan Chase Co | JPMorgan Chase vs. Bank of America | JPMorgan Chase vs. Wells Fargo | JPMorgan Chase vs. JPMorgan Chase Co |
| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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