Correlation Between JPMorgan Chase and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and Federal Agricultural 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 Federal Agricultural 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 Federal Agricultural Mortgage, you can compare the effects of market volatilities on JPMorgan Chase and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Federal Agricultural.
Diversification Opportunities for JPMorgan Chase and Federal Agricultural
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JPMorgan and Federal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Federal Agricultural go up and down completely randomly.
Pair Corralation between JPMorgan Chase and Federal Agricultural
Assuming the 90 days trading horizon JPMorgan Chase Co is expected to generate 0.94 times more return on investment than Federal Agricultural. However, JPMorgan Chase Co is 1.07 times less risky than Federal Agricultural. It trades about -0.1 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.19 per unit of risk. If you would invest 1,991 in JPMorgan Chase Co on August 27, 2024 and sell it today you would lose (47.00) from holding JPMorgan Chase Co or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan Chase Co vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| JPMorgan Chase |
| Federal Agricultural |
JPMorgan Chase and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan Chase and Federal Agricultural
The main advantage of trading using opposite JPMorgan Chase and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.The idea behind JPMorgan Chase Co and Federal Agricultural Mortgage 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.| Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. JPMorgan Chase Co |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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