Correlation Between Sound Financial and JPMorgan Chase
Can any of the company-specific risk be diversified away by investing in both Sound Financial 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 Sound Financial and JPMorgan Chase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and JPMorgan Chase Co, you can compare the effects of market volatilities on Sound Financial 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 Sound Financial with a short position of JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and JPMorgan Chase.
Diversification Opportunities for Sound Financial and JPMorgan Chase
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sound and JPMorgan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial 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 Sound Financial 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 Sound Financial 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 Sound Financial i.e., Sound Financial and JPMorgan Chase go up and down completely randomly.
Pair Corralation between Sound Financial and JPMorgan Chase
Given the investment horizon of 90 days Sound Financial Bancorp is expected to generate 0.45 times more return on investment than JPMorgan Chase. However, Sound Financial Bancorp is 2.22 times less risky than JPMorgan Chase. It trades about -0.18 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.21 per unit of risk. If you would invest 4,141 in Sound Financial Bancorp on January 20, 2024 and sell it today you would lose (117.00) from holding Sound Financial Bancorp or give up 2.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. JPMorgan Chase Co
Performance |
| Timeline |
| Sound Financial Bancorp |
| JPMorgan Chase |
Sound Financial and JPMorgan Chase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and JPMorgan Chase
The main advantage of trading using opposite Sound Financial and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial 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 Sound Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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