Correlation Between JPMorgan Chase and Merck

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

Diversification Opportunities for JPMorgan Chase and Merck

  Correlation Coefficient

Good diversification

The 3 months correlation between JPMorgan and Merck is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Merck go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Merck

Considering the 90-day investment horizon JPMorgan Chase Co is expected to under-perform the Merck. In addition to that, JPMorgan Chase is 1.44 times more volatile than Merck Company. It trades about -0.12 of its total potential returns per unit of risk. Merck Company is currently generating about -0.06 per unit of volatility. If you would invest  10,832  in Merck Company on December 22, 2022 and sell it today you would lose (239.00)  from holding Merck Company or give up 2.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

JPMorgan Chase Co  vs.  Merck Company

 Performance (%) 
JPMorgan Chase 

JPMorgan Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, JPMorgan Chase is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.
Merck Company 

Merck Performance

0 of 100

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

JPMorgan Chase and Merck Volatility Contrast

   Predicted Return Density   

Pair Trading with JPMorgan Chase and Merck

The main advantage of trading using opposite JPMorgan Chase and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.
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The idea behind JPMorgan Chase Co and Merck 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.
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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