Correlation Between JPMorgan Chase and Crane

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Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and Crane 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 Crane 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 Crane Company, you can compare the effects of market volatilities on JPMorgan Chase and Crane 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 Crane. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Crane.

Diversification Opportunities for JPMorgan Chase and Crane

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JPMorgan and Crane is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company 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 Crane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane Company has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Crane go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Crane

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 1.13 times less return on investment than Crane. But when comparing it to its historical volatility, JPMorgan Chase Co is 2.11 times less risky than Crane. It trades about 0.41 of its potential returns per unit of risk. Crane Company is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  12,342  in Crane Company on December 30, 2023 and sell it today you would earn a total of  1,171  from holding Crane Company or generate 9.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JPMorgan Chase Co  vs.  Crane Company

 Performance 
       Timeline  
JPMorgan Chase 

Risk-Adjusted Performance

24 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.
Crane Company 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Chase and Crane Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Chase and Crane

The main advantage of trading using opposite JPMorgan Chase and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Crane 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 Crane will offset losses from the drop in Crane's long position.
The idea behind JPMorgan Chase Co and Crane Company 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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