Correlation Between Merck and JPMorgan Chase

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

Diversification Opportunities for Merck and JPMorgan Chase

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Merck and JPMorgan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Merck 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 Merck Company are associated (or correlated) with JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of Merck i.e., Merck and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Merck and JPMorgan Chase

Considering the 90-day investment horizon Merck is expected to generate 2.78 times less return on investment than JPMorgan Chase. But when comparing it to its historical volatility, Merck Company is 1.03 times less risky than JPMorgan Chase. It trades about 0.04 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11,592  in JPMorgan Chase Co on July 12, 2024 and sell it today you would earn a total of  9,750  from holding JPMorgan Chase Co or generate 84.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Merck Company  vs.  JPMorgan Chase Co

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in November 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
JPMorgan Chase 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 4 (%) 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 newest stock price disarray, may contribute to short-term losses for the investors.

Merck and JPMorgan Chase Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and JPMorgan Chase

The main advantage of trading using opposite Merck and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, JPMorgan Chase 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 JPMorgan Chase will offset losses from the drop in JPMorgan Chase's long position.
The idea behind Merck Company and JPMorgan Chase Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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