Correlation Between JP Morgan and American Funds

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

Diversification Opportunities for JP Morgan and American Funds

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between JP Morgan and American is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and American Funds Developing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Developing and JP Morgan 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 JP Morgan Chase are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Developing has no effect on the direction of JP Morgan i.e., JP Morgan and American Funds go up and down completely randomly.

Pair Corralation between JP Morgan and American Funds

Considering the 90-day investment horizon JP Morgan Chase is expected to generate 1.38 times more return on investment than American Funds. However, JP Morgan is 1.38 times more volatile than American Funds Developing. It trades about 0.03 of its potential returns per unit of risk. American Funds Developing is currently generating about -0.04 per unit of risk. If you would invest  11,373  in JP Morgan Chase on September 1, 2022 and sell it today you would earn a total of  2,283  from holding JP Morgan Chase or generate 20.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

JP Morgan Chase  vs.  American Funds Developing

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, JP Morgan revealed solid returns over the last few months and may actually be approaching a breakup point.

JP Morgan Price Channel

American Funds Developing 
American Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Developing are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

JP Morgan and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and American Funds

The main advantage of trading using opposite JP Morgan and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, American Funds 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 Funds will offset losses from the drop in American Funds' long position.
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The idea behind JP Morgan Chase and American Funds Developing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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