Correlation Between HSBC Holdings and JPMorgan Chase

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Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and JPMorgan Chase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and JPMorgan Chase Co, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and JPMorgan Chase.

Diversification Opportunities for HSBC Holdings and JPMorgan Chase

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between HSBC Holdings and JPMorgan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and HSBC Holdings 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 HSBC Holdings PLC 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 HSBC Holdings i.e., HSBC Holdings and JPMorgan Chase go up and down completely randomly.

Pair Corralation between HSBC Holdings and JPMorgan Chase

Given the investment horizon of 90 days HSBC Holdings PLC is expected to generate 1.09 times more return on investment than JPMorgan Chase. However, HSBC Holdings is 1.09 times more volatile than JPMorgan Chase Co. It trades about 0.03 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.01 per unit of risk. If you would invest  2,706  in HSBC Holdings PLC on December 23, 2022 and sell it today you would earn a total of  671.00  from holding HSBC Holdings PLC or generate 24.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HSBC Holdings PLC  vs.  JPMorgan Chase Co

 Performance (%) 
       Timeline  
HSBC Holdings PLC 

HSBC Holdings Performance

10 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, HSBC Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.
JPMorgan Chase 

JPMorgan Performance

0 of 100

Over the last 90 days JPMorgan Chase Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, JPMorgan Chase is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

HSBC Holdings and JPMorgan Chase Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HSBC Holdings and JPMorgan Chase

The main advantage of trading using opposite HSBC Holdings and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.
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The idea behind HSBC Holdings PLC 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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