Correlation Between East West and JPMorgan Chase
Can any of the company-specific risk be diversified away by investing in both East West 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 East West and JPMorgan Chase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Bancorp and JPMorgan Chase Co, you can compare the effects of market volatilities on East West 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 East West with a short position of JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and JPMorgan Chase.
Diversification Opportunities for East West and JPMorgan Chase
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between East and JPMorgan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and East West 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 East West Bancorp 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 has no effect on the direction of East West i.e., East West and JPMorgan Chase go up and down completely randomly.
Pair Corralation between East West and JPMorgan Chase
Given the investment horizon of 90 days East West Bancorp is expected to under-perform the JPMorgan Chase. But the stock apears to be less risky and, when comparing its historical volatility, East West Bancorp is 1.12 times less risky than JPMorgan Chase. The stock trades about -0.06 of its potential returns per unit of risk. The JPMorgan Chase Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 19,369 in JPMorgan Chase Co on January 25, 2024 and sell it today you would lose (155.00) from holding JPMorgan Chase Co or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. JPMorgan Chase Co
Performance |
| Timeline |
| East West Bancorp |
| JPMorgan Chase |
East West and JPMorgan Chase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and JPMorgan Chase
The main advantage of trading using opposite East West and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West 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.The idea behind East West Bancorp 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.| JPMorgan Chase vs. Citigroup | JPMorgan Chase vs. Wells Fargo | JPMorgan Chase vs. Toronto Dominion Bank | JPMorgan Chase vs. Nu Holdings |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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