Correlation Between JPMorgan Chase and Microsoft

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

Diversification Opportunities for JPMorgan Chase and Microsoft

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JPMorgan and Microsoft is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Microsoft go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Microsoft

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 1.51 times less return on investment than Microsoft. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.19 times less risky than Microsoft. It trades about 0.09 of its potential returns per unit of risk. Microsoft is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  23,444  in Microsoft on January 20, 2024 and sell it today you would earn a total of  16,983  from holding Microsoft or generate 72.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JPMorgan Chase Co  vs.  Microsoft

 Performance 
       Timeline  
JPMorgan Chase 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JPMorgan Chase may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Microsoft 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

JPMorgan Chase and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Chase and Microsoft

The main advantage of trading using opposite JPMorgan Chase and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
The idea behind JPMorgan Chase Co and Microsoft 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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