Correlation Between Visa and Jpmorgan

Can any of the company-specific risk be diversified away by investing in both Visa and Jpmorgan 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 Visa and Jpmorgan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Class A and Jpmorgan Equity Fund, you can compare the effects of market volatilities on Visa and Jpmorgan 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 Visa with a short position of Jpmorgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Jpmorgan.

Diversification Opportunities for Visa and Jpmorgan

0.45

Correlation Coefficient

Visa  Jpmorgan

Very weak diversification

The 3 months correlation between Visa and Jpmorgan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Jpmorgan Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Equity and Visa 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 Visa Class A are associated (or correlated) with Jpmorgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Equity has no effect on the direction of Visa i.e., Visa and Jpmorgan go up and down completely randomly.

Pair Corralation between Visa and Jpmorgan

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Jpmorgan. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.25 times less risky than Jpmorgan. The stock trades about -0.13 of its potential returns per unit of risk. The Jpmorgan Equity Fund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,316  in Jpmorgan Equity Fund on February 4, 2024 and sell it today you would earn a total of  1.00  from holding Jpmorgan Equity Fund or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Jpmorgan Equity Fund

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Jpmorgan Equity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Equity Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Jpmorgan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Jpmorgan

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

The idea behind Visa Class A and Jpmorgan Equity Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.