Correlation Between Bank of New York and JPMorgan Chase

Can any of the company-specific risk be diversified away by investing in both Bank of New York 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 Bank of New York and JPMorgan Chase into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of New and JPMorgan Chase Co, you can compare the effects of market volatilities on Bank of New York 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 Bank of New York with a short position of JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and JPMorgan Chase.

Diversification Opportunities for Bank of New York and JPMorgan Chase

0.72

Correlation Coefficient

Bank of New York  JPMorgan Chase

Poor diversification

The 3 months correlation between Bank and JPMorgan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Bank of New York 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 Bank of New 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 Bank of New York i.e., Bank of New York and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Bank of New York and JPMorgan Chase

Allowing for the 90-day total investment horizon Bank of New is expected to generate 0.73 times more return on investment than JPMorgan Chase. However, Bank of New is 1.37 times less risky than JPMorgan Chase. It trades about -0.05 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.18 per unit of risk. If you would invest  5,524  in Bank of New on January 19, 2024 and sell it today you would lose (78.00) from holding Bank of New or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Bank of New  vs.  JPMorgan Chase Co

Bank of New York

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank of New York is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

JPMorgan Chase

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JPMorgan Chase may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Bank of New York and JPMorgan Chase

The main advantage of trading using opposite Bank of New York and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of New York 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 Bank of New 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.

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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.