Correlation Between JPMorgan Chase and American Axle
Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and American Axle 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 American Axle 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 American Axle Manufacturing, you can compare the effects of market volatilities on JPMorgan Chase and American Axle 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 American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and American Axle.
Diversification Opportunities for JPMorgan Chase and American Axle
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JPMorgan and American is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa 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 American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and American Axle go up and down completely randomly.
Pair Corralation between JPMorgan Chase and American Axle
Considering the 90-day investment horizon JPMorgan Chase Co is expected to under-perform the American Axle. But the stock apears to be less risky and, when comparing its historical volatility, JPMorgan Chase Co is 1.15 times less risky than American Axle. The stock trades about -0.07 of its potential returns per unit of risk. The American Axle Manufacturing is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 736.00 in American Axle Manufacturing on January 28, 2024 and sell it today you would earn a total of 16.00 from holding American Axle Manufacturing or generate 2.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
JPMorgan Chase Co vs. American Axle Manufacturing
Performance |
Timeline |
JPMorgan Chase |
American Axle Manufa |
JPMorgan Chase and American Axle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with JPMorgan Chase and American Axle
The main advantage of trading using opposite JPMorgan Chase and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle's long position.The idea behind JPMorgan Chase Co and American Axle Manufacturing 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.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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