Correlation Between JPMorgan Chase and Netflix

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

Diversification Opportunities for JPMorgan Chase and Netflix

0.85

Correlation Coefficient

JPMorgan Chase  Netflix

Very poor diversification

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

Pair Corralation between JPMorgan Chase and Netflix

Considering the 90-day investment horizon JPMorgan Chase Co is expected to under-perform the Netflix. In addition to that, JPMorgan Chase is 1.08 times more volatile than Netflix. It trades about -0.21 of its total potential returns per unit of risk. Netflix is currently generating about -0.08 per unit of volatility. If you would invest  62,769  in Netflix on January 20, 2024 and sell it today you would lose (1,713) from holding Netflix or give up 2.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

JPMorgan Chase Co  vs.  Netflix

JPMorgan Chase

Risk-Adjusted Performance

7 of 100

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.

Netflix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and Netflix

The main advantage of trading using opposite JPMorgan Chase and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Netflix 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 Netflix will offset losses from the drop in Netflix's long position.

The idea behind JPMorgan Chase Co and Netflix 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.