Correlation Between East West and JP Morgan

By analyzing existing cross correlation between East West Bancorp and JP Morgan Chase, you can compare the effects of market volatilities on East West and JP Morgan 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 JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and JP Morgan.

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Can any of the company-specific risk be diversified away by investing in both East West and JP Morgan 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 JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for East West and JP Morgan

0.87
  Correlation Coefficient
East West Bancorp
JP Morgan Chase

Very poor diversification

The 3 months correlation between East West and JP Morgan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and JP Morgan Chase in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan 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 JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Chase has no effect on the direction of East West i.e., East West and JP Morgan go up and down completely randomly.

Pair Corralation between East West and JP Morgan

Given the investment horizon of 90 days East West Bancorp is expected to generate 1.28 times more return on investment than JP Morgan. However, East West is 1.28 times more volatile than JP Morgan Chase. It trades about 0.05 of its potential returns per unit of risk. JP Morgan Chase is currently generating about 0.03 per unit of risk. If you would invest  4,519  in East West Bancorp on September 4, 2021 and sell it today you would earn a total of  3,134  from holding East West Bancorp or generate 69.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

East West Bancorp  vs.  JP Morgan Chase

 Performance (%) 
      Timeline 
East West Bancorp 
East West Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, East West may actually be approaching a critical reversion point that can send shares even higher in January 2022.

East West Price Channel

JP Morgan Chase 
JP Morgan Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, JP Morgan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

East West and JP Morgan Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with East West and JP Morgan

The main advantage of trading using opposite East West and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, JP Morgan 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 JP Morgan will offset losses from the drop in JP Morgan's long position.

East West Bancorp

Pair trading matchups for East West

The idea behind East West Bancorp and JP Morgan Chase 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.

JP Morgan Chase

Pair trading matchups for JP Morgan

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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