Correlation Between JPMorgan Chase and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp, you can compare the effects of market volatilities on JPMorgan Chase and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Alcoa Corp.
Diversification Opportunities for JPMorgan Chase and Alcoa Corp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JPMorgan and Alcoa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Alcoa Corp go up and down completely randomly.
Pair Corralation between JPMorgan Chase and Alcoa Corp
Considering the 90-day investment horizon JPMorgan Chase is expected to generate 2.97 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.56 times less risky than Alcoa Corp. It trades about 0.11 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,201 in Alcoa Corp on August 28, 2024 and sell it today you would earn a total of 1,521 from holding Alcoa Corp or generate 47.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan Chase Co vs. Alcoa Corp
Performance |
| Timeline |
| JPMorgan Chase |
| Alcoa Corp |
JPMorgan Chase and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan Chase and Alcoa Corp
The main advantage of trading using opposite JPMorgan Chase and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| JPMorgan Chase vs. Nu Holdings | JPMorgan Chase vs. HSBC Holdings PLC | JPMorgan Chase vs. Bank of Montreal | JPMorgan Chase vs. Bank of Nova |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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