Correlation Between Microsoft and JPMorgan Chase

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

Diversification Opportunities for Microsoft and JPMorgan Chase

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Microsoft and JPMorgan is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Microsoft and JPMorgan Chase

Given the investment horizon of 90 days Microsoft is expected to generate 1.11 times more return on investment than JPMorgan Chase. However, Microsoft is 1.11 times more volatile than JPMorgan Chase Co. It trades about 0.02 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about 0.02 per unit of risk. If you would invest  21,869  in Microsoft on September 10, 2022 and sell it today you would earn a total of  2,871  from holding Microsoft or generate 13.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  JPMorgan Chase Co

 Performance (%) 
       Timeline  
Microsoft 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Microsoft Price Channel

JPMorgan Chase 
JPMorgan Performance
7 of 100
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. Even with relatively unsteady basic indicators, JPMorgan Chase may actually be approaching a critical reversion point that can send shares even higher in January 2023.

JPMorgan Price Channel

Microsoft and JPMorgan Chase Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and JPMorgan Chase

The main advantage of trading using opposite Microsoft and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.
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The idea behind Microsoft 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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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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