Correlation Between JPMorgan Chase and East West

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Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and East West 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 East West 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 East West Bancorp, you can compare the effects of market volatilities on JPMorgan Chase and East West 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 East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and East West.

Diversification Opportunities for JPMorgan Chase and East West

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between JPMorgan and East is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp 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 East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Bancorp has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and East West go up and down completely randomly.

Pair Corralation between JPMorgan Chase and East West

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.55 times more return on investment than East West. However, JPMorgan Chase Co is 1.83 times less risky than East West. It trades about 0.41 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.22 per unit of risk. If you would invest  18,345  in JPMorgan Chase Co on December 29, 2023 and sell it today you would earn a total of  1,607  from holding JPMorgan Chase Co or generate 8.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

JPMorgan Chase Co  vs.  East West Bancorp

 Performance 
       Timeline  
JPMorgan Chase 

Risk-Adjusted Performance

25 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.
East West Bancorp 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, East West may actually be approaching a critical reversion point that can send shares even higher in April 2024.

JPMorgan Chase and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Chase and East West

The main advantage of trading using opposite JPMorgan Chase and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.
The idea behind JPMorgan Chase Co and East West Bancorp 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.
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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