Correlation Between JPMorgan Chase and Bank of America
Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and Bank of America 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 Bank of America 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 Bank of America, you can compare the effects of market volatilities on JPMorgan Chase and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Bank of America.
Diversification Opportunities for JPMorgan Chase and Bank of America
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between JPMorgan and Bank is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Bank of America go up and down completely randomly.
Pair Corralation between JPMorgan Chase and Bank of America
Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.84 times more return on investment than Bank of America. However, JPMorgan Chase Co is 1.19 times less risky than Bank of America. It trades about 0.07 of its potential returns per unit of risk. Bank of America is currently generating about 0.01 per unit of risk. If you would invest 11,981 in JPMorgan Chase Co on January 24, 2024 and sell it today you would earn a total of 6,960 from holding JPMorgan Chase Co or generate 58.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan Chase Co vs. Bank of America
Performance |
| Timeline |
| JPMorgan Chase |
| Bank of America |
JPMorgan Chase and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan Chase and Bank of America
The main advantage of trading using opposite JPMorgan Chase and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| JPMorgan Chase vs. Citigroup | JPMorgan Chase vs. Wells Fargo | JPMorgan Chase vs. Toronto Dominion Bank | JPMorgan Chase vs. Nu Holdings |
| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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