Correlation Between JPMorgan Chase and Cisco Systems

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

Diversification Opportunities for JPMorgan Chase and Cisco Systems

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JPMorgan and Cisco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Cisco Systems go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Cisco Systems

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 1.71 times less return on investment than Cisco Systems. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.29 times less risky than Cisco Systems. It trades about 0.18 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,546  in Cisco Systems on September 2, 2022 and sell it today you would earn a total of  453.50  from holding Cisco Systems or generate 9.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JPMorgan Chase Co  vs.  Cisco Systems

 Performance (%) 
       Timeline  
JPMorgan Chase 
JPMorgan Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, JPMorgan Chase revealed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Price Channel

Cisco Systems 
Cisco Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Cisco Systems disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cisco Price Channel

JPMorgan Chase and Cisco Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Chase and Cisco Systems

The main advantage of trading using opposite JPMorgan Chase and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.
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The idea behind JPMorgan Chase Co and Cisco Systems 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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